Limitation of Liability

Horses often seem to be accidents waiting to happen, and most horse 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, also 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, and in every business transaction. When you buy a load of hay on time, for example, you are incurring a liability, here the obligation to pay for the hay. Such liability, voluntarily assumed, is part of the normal course of doing business, and is not the subject of this article.

More troublesome is 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 might 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. You might even incur liability by doing nothing more than keeping your own horses on your own property, if a court finds that the horses are an "attractive nuisance," and thus an unreasonable danger to trespassing children who are injured (see sidebar page 90). The list continues.

It should be obvious by now that the only way to avoid all potential liability is to abandon the horse business altogether. Few of us are willing to do that, however. The next best thing is to identify potential problem areas and plan accordingly. Accidents do happen, no matter how careful you are, and there always is 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 always is better to be safe than sorry.

Teamwork, Teamwork, Teamwork

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. Depending on your goals, you also might 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 though 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 (see sidebar page 91).

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 probably are 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, not damage control, should be your goal.

How Do I Owe Thee, Let Me Count The Ways

If you already have an established horse business, you made the decision about form of ownership at some point in the past, possibly with little thought to the available options. If so, it 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 situation.

A comprehensive discussion of the various forms of ownership appeared in The Horse of April 1997. In summary, a horse business can be operated as a sole proprietorship, as a partnership (either general or limited), or as a corporation (either a "C" corporation or an "S" corporation). State law could give you other options, such as a limited liability company. The correct choice for your business depends on many factors. These 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, how much personal responsibility for the debts and liabilities of the business you are willing to accept, and whether you are prepared to deal with legally mandated operating formalities necessary to some forms of ownership.

The choice you make now can affect your future personal liability in case of a lawsuit against you and your business. Choosing to incorporate, for example, might prevent a successful litigant from reaching your personal assets. You should weigh that potential advantage against increased administrative responsibilities and tax treatment that might be less favorable than that accorded another type of ownership plan, however, before making a final decision.

Get It In Writing

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 that way. The old axiom that an oral contract is only worth the paper it is written on applies to any horse activity, however, and it is 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 think this is too much trouble, think again.

Consider the following scenario: A horse you board for an out-of-town owner starts showing signs of colic one night and the veterinarian tells you that immediate surgery is necessary to save the animal's life. You cannot reach the owner. Can you authorize the necessary emergency veterinary treatment with any confidence that you will not be liable to the veterinarian if the owner fails to pay what promises to be a sizable bill? A properly drafted boarding contract should address issues such as this one, leaving no doubt about the extent of your authority or who will be responsible for payment of the bills.

Contracts also 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 negligence 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 boarded horse is injured.

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 a better practice to include such a waiver of liability in your boarding contracts. Some liability insurance policies require such language in a boarding contract (your team members can advise you), 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, but it will be pure happenstance if one of those stock contracts matches all 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.

Act Reasonably

Probably the most important thing you can do to forestall a lawsuit is to conduct your activities in a "reasonable" manner. The most frequent basis for liability when someone is injured or when property is damaged is a claim of negligence. 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 the fencing 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 might 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; keep tack and other equipment in good repair; be aware of the physical condition of the horses in your care; hire competent help (often easier said than done); pay attention.


In recent years, legislatures in most states have enacted laws that limit the liability of a farm owner for injuries suffered by a third party arising from the recreational use of horses, if certain precautions are taken. Kentucky's limited liability law, for example (supported by the Kentucky Horse Council, Kentucky Farm Bureau, and other organizations), took effect on July 15, 1996. It is typical of similar legislation in other states and will be used here as an example.

Codified as Kentucky Revised Statute 247.402, the law recognizes that activities with horses and other farm animals have inherent risks that "are beyond the reasonable control of farm activity sponsors, farm animal professionals, or other persons." Because of these inherent risks, a farm owner has a duty to "reasonably warn participants in farm animal activities of the inherent risks" of those activities, but not a duty "to reduce or eliminate" these inherent risks.

The law does not protect a farm owner against his or her own negligence, but it does set the standard for non-negligent conduct as " the standards of care within the profession." The law also provides that a farm owner satisfies his or her duty to warn participants in horse activities by posting a prominent notice warning of the risks inherent in the activity. In effect, Kentucky's law requires a person taking part in a horse-related activity to assume the risks of the activity.

KRS 247.402 is a "get out of jail free" card for farm owners in Kentucky, provided they are not negligent and provided they follow the statute's guidelines regarding proper notice to participants. The law does not cover all activities with horses; racing, for example, is exempt. The law does provide substantial protection for most Kentucky farm owners, and the notice provision is easily met, if a farm owner is aware of the law. You should consult an attorney versed in equine law for information about similar laws in your home state and to ensure that your conduct meets the specific requirements of the law.

Posting a warning sign and conducting your business in a reasonable manner is much easier than defending yourself in a lawsuit.

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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