Liability Issues


The popularity of Judge Wapner's "Animal Court," Judge Koch's "The People's Court," "Judge Judy," "Judge Mills Lane," "Judge Joe Brown," and other similar "legal reality" television shows convinced Mr. and Mrs. Green that everyone wants to sue everyone else, with national exposure, if possible. They recognize that their modest horse business is a potential minefield of liability, but they are not sure how to either evaluate or minimize the risks.

Horses often seem to be accidents waiting to happen, and most owners can recount at least one horror story that starts with: "You aren't going to believe this, but..." Less apparent, but equally true, is the realization that horse businesses, by their very nature, can be "accident prone." Whether horses are your vocation or avocation, it is important to shield yourself from as much potential liability as possible. Failure to do so can be devastating, both personally and professionally.

Liability is an extremely broad legal concept, encompassing everything from an obligation to repay a debt to the responsibility a person has for the consequences of his or her actions. For someone in the horse business, liability lurks behind every stall door, in every paddock, on every trail, and in every business transaction. When you buy a load of hay on credit, for example, you are incurring a liability, in this case the obligation to pay for the hay at some point in the future. Such liability, voluntarily assumed, is part of the normal course of doing business, and is not the type of liability that concerns the Greens.

More troublesome is the potential liability that results when your actions cause harm to a third party. The sources are endless. If you board horses for other owners, you might be responsible for damages if one of those horses becomes injured while in your care. If you give riding lessons, you might be liable for injuries suffered by one of your riders. If you open your land for trail rides, you might be liable if a horse or rider gets hurt on your property. If you sell a horse, you may have a duty to disclose certain physical conditions of the animal, and you might be liable for damages if you do not do so. If a horse escapes from your property and causes injury to a person, another animal, or someone's property, you might find yourself responsible.

If you lease your horse to another person, you might be liable if the horse injures the lessee. If an employee becomes injured, you might be liable. If you agree to transport another person's horse in your trailer, you might be liable if the horse is injured. You may even incur liability by doing nothing more than keeping your own horses on your own property. This could happen if a court finds that the horses are an "attractive nuisance," and thus an unreasonable danger to trespassing children who are injured. The list continues.

Adequate insurance helps, and you should discuss your needs with a reputable insurance agent who is familiar with the horse business. It should be obvious, though, that the only way to insulate yourself from all potential liability is to abandon the horse business altogether. Few of us are willing to do that, however, and the next best thing is to identify potential problem areas and plan accordingly.

Accidents do happen, no matter how careful you are, and there is always a risk that you will find yourself on the wrong end of a lawsuit. Being blameless does not make you immune from a lawsuit, and being right does not guarantee that you will win in court if you are sued. Even if you do win, you likely will be faced with thousands of dollars in legal bills. When you are dealing with potential liability, it is always better to be safe than sorry.

The Greens decide on a preemptive strike, a visit to their attorney before any problems arise. With their attorney they can review plans for their horse operation, and the attorney can suggest ways to minimize the risk.

Attorneys like having a client ask them, ahead of time: "This is what I plan to do. Are there problems?" Attorneys hate having a client tell them, after the fact: "This is what I did. Can you fix it?"

Practice Preventive Legal Medicine

Many attorneys endorse the concept of a "legal audit," a review of your horse business with emphasis on potential problem areas and possible solutions. If you board horses and do not require written contracts with your boarders, for example, your attorney can recognize the need and draft a suitable document. If you do use a written contract, your attorney can suggest changes, if needed. After reviewing your plans and aspirations, your attorney can identify, and thus help you avoid, many of the pitfalls on the path to your business goals.

Whatever your objectives in the horse business--from owning a safe and sound pleasure horse, to managing a band of productive broodmares, to competing successfully on the "A" show circuit--you probably already rely on the expertise of a team of professionals. A veterinarian and farrier are essential members of the team, no matter what the activity, and depending on your goals, you may also need a trainer for your horse and a coach to help hone your own riding skills.

Just as important is your business team. The members should be selected with care, and should include an accountant, an attorney, and an insurance agent. All should be familiar with the horse industry. A good accountant can be the difference between a business that shows a profit and one that does not, by offering financial planning and bookkeeping services and by guiding you through the maze of state and federal tax laws and workers' compensation requirements.

Your attorney and insurance agent can help guard your investment, the former by anticipating problems and drafting written agreements to protect your interests and the latter by providing adequate insurance coverage. An attorney also can help you operate your business in compliance with local or state laws, among the most important of which are those designed to limit your liability in certain situations.

Locating professionals with experience in the horse business can be simple or difficult, depending on where you live. Personal referrals from other horse owners in your area are probably the best recommendations, and some states' bar associations offer lawyer referral services for attorneys. It is important that the team understands how your business operates now, and your goals for the future. You should have the team in place before you need their services. Prevention and risk management, not damage control, should be your goals.

Some of the issues raised by the Greens with their attorney include how to operate their business, a review of the contracts they use, the necessity of acting reasonably to minimize potential liability, and the effect of state law on their liability.

What's Attractive About A Nuisance?

A field of horses is a magnet for children, tempting some of them to climb a fence to play with the animals. If a child trespasses on your property and is injured by one of your horses, are you liable for the child's injuries? Trespassers generally are accorded little protection, but an exception is made for trespassing children if they fall under the umbrella of the "attractive nuisance" doctrine.

A land owner generally is liable for injuries to trespassing children if (1) the farm owner knows, or has reason to know, that children trespass on his or her property; (2) the farm owner knows, or has reason to know, that there is a condition on the property (in this case, grazing horses) that poses an unreasonable risk of harm to such children; (3) the children, because of their youth, are not likely to recognize the danger posed by the horses; (4) the farm owner does not exercise reasonable care to protect the children; and, (5) correcting the condition is relatively easy.

If horses in a field are an attractive nuisance, you may be liable for injuries incurred by trespassing children.

Laws on attractive nuisance vary from state to state, and you should consult an attorney for help interpreting the law and court decisions in your particular jurisdiction. In Kentucky, for example, horses in a field generally are not considered an attractive nuisance, possibly because of the importance of the horse industry to the state's economy. Your situation may be different, however, and it may be necessary to take particular measures to protect trespassing children.

This is another situation where a "legal audit" of your business may reap substantial benefits by identifying a potential problem before it becomes a real problem.

How Do I Own Thee? Let Me Count The Ways

If you already have an established horse business, then you have made the decision about form of ownership in the past, possibly with little thought to the available options or to the potential ramifications of your choice. If so, now might be a good time to review that choice. If you are contemplating starting a business, on the other hand, selecting the proper form of ownership should be the first decision you make. In either case, you should rely on your team of professionals to explain the possibilities and their application to your unique situation.

In summary, a horse business can be operated as a sole proprietorship, partnership, or corporation. State law may give you other options as well, such as a limited liability company or partnership.

There is no correct choice for all situations, and the best option for your business depends on many factors. These factors include the level of individual control you intend to exercise over the operation, whether you need to raise operating capital, the relative tax benefit of each option, and how much personal responsibility for the debts and liabilities of the business you are willing to accept.

The choice you make now also may affect your future personal liability in case of a lawsuit against you and your business. Choosing to incorporate, for example, may prevent a successful litigant from reaching your personal assets. However, you should weigh that potential advantage against the increased administrative responsibilities and tax treatment another type of ownership plan might require before making a final decision.

Get It In Writing

You have heard this before, but it merits repeating.

The horse business traditionally has operated on a handshake and a promise. This approach worked, more or less, for years, and many people still conduct their businesses this way. The old axiom that an oral contract is worth only the paper it is written on applies to any horse activity, making it prudent to obtain a written agreement for every significant business transaction. If you board horses, for example, have each horse owner sign a boarding contract that explains the responsibilities of the parties. If you give lessons, have your students (or their parents) sign contracts. If you offer trail riding, or make your land available for trail riding, have the participants sign a release. If you think this is too much trouble, think again.

Contracts should include an exculpatory clause, or waiver of liability, that excuses the party performing the service, the owner of a boarding farm, for example, from liability in the performance of the contract. The effect of such a clause is to limit the farm owner's liability in the event that the boarding horse or its owner is injured. You generally cannot protect yourself from negligent actions, no matter how well written the contract, which emphasizes the need to act reasonably at all times.

Whether such a waiver of liability can be enforced to prevent a lawsuit against the farm owner will depend on the laws of your particular state, and to a large extent on how well the clause is drafted. Even if there is no clear authority in your state for the enforceability of an exculpatory clause, and this varies from state to state, it is better practice to include such a waiver of liability in your boarding contracts. Some liability insurance policies require such language in a boarding contract, and a horse owner might be less likely to initiate a lawsuit if he or she has signed a waiver.

The value of a written contract depends entirely on how well the document is drafted, and you should consult your attorney for guidance. It is tempting to buy one of several available books of fill-in-the-blank legal forms, and run off a few copies at the local print shop. While this might make economic sense in the short run, it will be pure happenstance if one of those fill-in-the-blank contracts matches all--or any--of the requirements of your particular situation. One-size-fits-all legal forms can be a good starting point, but you and your attorney should review the document carefully and adapt it to your needs. It will be money well spent if a problem arises.

Act Reasonably

Probably the most important thing you can do to forestall a lawsuit is to conduct your business in a "reasonable" manner. The most frequent basis for liability is a claim that you acted negligently when someone is injured or when property is damaged. Generally, you can avoid being legally negligent simply by acting reasonably under the circumstances, but you must know what this standard of reasonable care means in practice.

Separating the paddocks of two aggressive breeding stallions with a double row of four-board plank fencing probably is reasonable conduct; separating those two stallions with a single strand of barbed wire probably is not. It is not sufficient that you did the best you could under the circumstances--perhaps a single strand of barbed wire is all you could afford--the standard of care is that of a hypothetical "reasonable person," not a specific individual. Nor is it always safe to do things the same as everyone else in your area. It is possible, although not likely, that everyone you know fails to meet the reasonable care standard.

On the other hand, reasonable care does not require a superhuman effort. Nor does it require you always to adopt the best option. The fencing examples above represent two extremes, and there may be a middle ground that also would constitute reasonable care under the circumstances. Usually, reasonable care will be simple common sense: Make certain that your fences are in good repair and that there are no dangerous holes in the paddocks; inspect stall interiors for nails or other protruding objects; be aware of the physical condition of the horses in your care; hire competent help; and pay attention.

Take Advantage Of State Law

An old joke asks: "What are the nine most frightening words in the English language?" The answer: "I'm from the government, and I'm here to help."

Negative perceptions aside, the government sometimes manages to do something that actually makes a horse business easier and more economical to run. One of the best examples in recent years is the passage, in most states, of laws that limit the liability of farm owners, horse owners, and sponsors of equine activities. As of this writing (summer 1999), 43 states have some type of equine liability law on their books. Texts of the laws in your particular state can be found in statute books at college or local libraries, from your local legislators, on the Internet, or from an attorney. The last-named is the best source for advice on these laws.

Because the equine liability laws vary from state to state, a comprehensive, jurisdiction-specific discussion is beyond the scope of this book. Generally, though, the laws recognize that any equine activity has certain built-in risks, and that a farm owner or activity sponsor has a responsibility to warn participants of those risks. The laws generally do not impose on the owner or sponsor a duty to eliminate those inherent risks. In other words, the equine liability laws require participants in an equine activity to assume many of the risks associated with that activity.

Kentucky's equine liability law, found at Kentucky Revised Statutes 247.401-247.4029, is similar to laws in other states, and is illustrative of what these laws can and cannot do for a farm owner. Keep in mind, though, that the law in Kentucky is not the law in any other state, and you should get professional advice in interpreting and implementing the equine liability law in your jurisdiction. By the same token, you should not rely on the cursory treatment in this book as your only authority on Kentucky liability law. Your best guide is an attorney familiar with the topic.

Kentucky's equine liability law is applicable to most, but not all, equine activities. Horse shows and other competitions, training, boarding, trail rides, farrier and veterinary services are covered by the law. Most horse racing activities, questions arising from fencing problems, and liability of landowners to trespassers are not covered. The inherent risks of working with horses, such as the simple fact they are big, powerful animals that can hurt you, their general unpredictability, and the fact that other participants might act negligently, are covered. Negligent acts by the equine professional or sponsor, such as providing faulty tack or a dangerous horse, or the failure to post warning signs regarding known dangerous conditions on the land, are not covered. While the law does not protect a farm owner against his or her own negligence, it does set the standard for non-negligent conduct as "adherence to the standards of care within the profession." In other words, you are not negligent if you act like a reasonable horse person would in similar circumstances.

Equine liability laws are "get out of jail free" cards for farm owners and other equine professionals in Kentucky, provided they are not negligent and they follow the statute's guidelines regarding proper notice to participants. To receive the benefits of the Kentucky law, a farm owner or other equine activity sponsor must post a warning notice, or notices, in a conspicuous place. The sign must contain the following language:


Under Kentucky law, a farm activity sponsor, farm animal professional, or other person does not have the duty to eliminate all risks of injury of participation in farm animal activities. There are inherent risks of injury that you voluntarily accept if you participate in farm animal activities.

A similar notice must be included in all written contracts for professional equine services, including instruction and the rental of horses and/or tack for trail riding and other activities. If such a notice is not part of the contract, the farm owner will not be able to rely on the favorable (to him or her) statutory provisions in the event of a lawsuit. Enforcement of an exculpatory clause that does not include any specific language required by statute is problematic.

Consultation with an attorney familiar with equine law can tell you whether your state has an equine liability law (the odds are good that it does), how the law operates, and what the law requires that you do. You should consider equine liability laws as sound advice about how to stay out of trouble. You ignore that advice at your own peril.

About the Author

Milt Toby, JD

Milt Toby is an author and attorney who has been writing about horses and legal issues affecting the equine industry for more than 40 years. Former Chair of the Kentucky Bar Association's Equine Law Section, Milt has written eight nonfiction books, including national award winners Dancer’s Image and Noor. He teaches Equine Commercial Law in the University of Louisville's Equine Industry Program.

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