Horses and the Law
This article was originally written for publication in the Aiken Horse Magazine.
“Yay, we made it!” said my awaking young son to his mom after spending a stormy night in a “spooky” old lowcountry house. He was relieved that nothing came for them in the night and he was ready to get going. That is how many folks feel now about the last three months of pandemic and quarantine. Our equestrian world is resuming action on many fronts and that is a very good thing.
As you reset and re-emerge, this is an excellent time to review and update your equine legal matters. Yes, I know, that sounds like as much fun as deep cleaning the wash stall. But, just like the neglected wash stall, if you ignore it, you know a serious problem will arise. And, once it is done, your legal matters will be in order and you will feel much better.
When I work with clients on these projects, we like to approach it from a holistic perspective. We review the nature of their equine-related business or hobby, discuss the types of interactions they have with the public, employees, vendors, government, partners and others to get a full picture. Then we build an integrated plan to make sure their assets are protected, their agreements are up to date with any changes in the law, their insurance policies meet their needs and their operations are in compliance. These issues apply to nearly all horse owners, commercial barns, equestrian professionals, nonprofit organizations and event organizers. As you consider an “equine legal audit,” here are some key points to consider:
Asset Protection. Have you set up the ownership of your property or business in a way that protects your personal assets from attack by creditors or injured parties who may sue you? By forming a limited liability company or corporation, you can protect your business and your personal assets and you may also obtain certain tax advantages.
Liability Protection. Think about your boarding agreements, releases, waivers and transportation agreements – or the absence of these. Having written agreements for all of these situations is essential. If properly prepared, these documents can truly protect you from liability exposure. They should be updated regularly as times and the law change. For example, in light of COVID-19, we recommend adding language that addresses the spread of communicable viruses. If you fail to have good agreements and something goes wrong you are completely vulnerable to claims and lawsuits.
Liability protection terms should also be incorporated into transaction agreements when you buy, sell, lease or train a horse. Allocating responsibility in these transactions is important to make sure all parties understand their risk and legal duties. In the absence of such provisions, expensive and messy battles often ensue when there is a dispute. Not only is that a potentially expensive legal problem, it can also mean public relations trouble for your business and a serious operations distraction.
When was the last time you inspected your posted warning signs? Are they in the right locations? Do they meet current law? Warning signs are a valuable and completely affordable tool to help protect you from liability. However, they do not make you bullet-proof. There are exceptions to the warning sign liability protections that you need to consider and make a plan to close those gaps successfully. An experienced equine law attorney can review situations and scenarios that you need to recognize so you can address potential problems. Because warning signs do not provide complete protection, you need to add a layer of good insurance to better cover you. There are a variety of polices that insure real estate, businesses and individuals and there are substantial differences on their coverages. Be sure to review what your needs are and if you have the right policy in place. One question that often arises is will a homeowners’ policy cover an injured person who is riding the owner’s horse? If the person was a boarder or paying for a lesson on the horse, there may not be coverage. Good insurance will pay for itself many times over and several insurers who work in the equestrian area will provide guidance and consulting free of charge to help you find the right polices.
Boarding Agreements and Barn Rules. Yes, it is time to dust off that agreement that you prepared years ago and get it updated. Think of all the issues you have had with problem boarders because you did not have good remedies spelled out in the boarding agreement. You can fix that. What about the times a boarded horse needed emergency vet treatment and you could not reach the owner? You and the owner can alleviate that highly stressful situation by putting a plan in the boarding agreement. How are you handling liability issues, feeds and supplements, trailering to shows, access to the barn, arena or trails in your boarding documents? These are just a few of the many “extra” issues that you can and should address in an effective boarding agreement.
Do you have written barn rules? A good set of barn rules will establish expectations and support courteous practices with boarders and the public. Barn rules usually address practical matters and safety issues. They should be objective and enforceable. Ideally, you should incorporate your barn rules into your boarding agreement so that if there is a serious or repetitive violation of the rules, you can take action against the boarder to remove the horse.
Employment and Immigration Issues. Finding and keeping talented and reliable staff is essential to the success of every business. It can be especially challenging for the equestrian community. As a result, some employers are, shall we say, casual, in their employment policies. While that practice may be tempting, it is usually a recipe for disaster. Taking basic steps to assure compliance with state and federal laws can save you time and money and protect you from civil and criminal actions. In addition, many equestrian businesses and event organizers have significant interaction with young people. When you work with children under the age of 18, additional staff and volunteer background checks and compliance with programs such as USEF’s “Safe Sport” may be needed.
Contracts and Leases. Not all of the people who provide services for an equestrian business are employees. When you have a trainer, farrier, performance therapist or other professional providing services at your facility or at your direction, you need a plan to handle those situations. If the trainer is based on the property or travels there regularly, you need a written independent contractor agreement or employment agreement in place that sets out the duties, responsibilities, compensation and liability terms. This will protect you and the trainer. For farriers and other regular service providers, you may want to have them sign your liability waiver – especially if they are treating horses from multiple owners.
Also consider situations where you lease equipment or property to others. These agreements need to be in writing. A written lease is enforceable between the parties and provides a record of the arrangement in the event that one of the original parties passes away or is no longer involved in the transaction. Clients are sometimes shocked when seemingly simple hand-shake deals produce surprisingly different versions when a problem arises. Don’t let that happen to you!
A thorough legal audit should review all of your existing contracts and identify business relationships and deals not currently covered by written agreements that may merit action.
Equestrian Organizations and Associations. The South Carolina equestrian community is filled with active nonprofit organizations. They operate rescues, competitions in all disciplines, hunts, pony clubs and the like. Nearly all are governed by a volunteer board of directors and most have few, if any, employees. Regardless of their size or mission, they encounter significant legal issues. In addition to regular business and employment law issues, a nonprofit corporation must comply with the state’s Nonprofit Corporations Act. The Act sets forth strict requirements for governance, operations and financial accountability. In return for operating under those rules, it grants board members personal liability protection when dealing with the public. Nonprofit corporations must maintain statutorily-compliant bylaws, fiscal procedures, tax filings and membership structures. All of these documents and procedures should be reviewed and updated regularly to protect the organization and facilitate its successful operation. If the documents do not comply with the Act or if the leaders fail to follow the organization’s bylaws and other governing documents, the organization’s liability protection may be lost and the individual board members may be exposed to personal liability for claims against the organization. In addition, by failing to adhere to the Act’s requirements, the organization’s charter can be revoked by the Secretary of State.
If you are a board member of a nonprofit corporation, you have a fiduciary duty to the organization and that duty includes making sure its operations, bylaws, meetings, membership program and asset management comply with the Act. A fiduciary duty is a special relationship that requires a high standard of care. If the board breaches that duty, board members become personally liable for claims and lawsuits by injured parties. When you think of the risks assumed by some nonprofits, this is no small matter. To address this challenge, I again recommend layering protection: make sure you have up-to-date governing documents and procedures that comply with the Act, and purchase public liability insurance and Directors and Officers liability insurance. By using strong internal documents and adding insurance protections, your organization will be better able to meet its mission and encourage talented volunteers to actively serve.
If the nonprofit is not incorporated, it is known as an “unincorporated association.” An unincorporated association does not have the formal operating requirements of a nonprofit corporation, but its members do not have the same liability protections either. If the unincorporated association has any assets or if it sponsors or produces any public events, the members are potentially taking substantial personal risk. Given the litigious environment surrounding sports and recreation, incorporating the association to protect its members and foster its growth is usually recommended.
I hope you will use this moment of reset to take a look at your business, nonprofit organization or personal equine law related matters to see if a legal audit or an update of your agreements is in order. I am confident you will be glad when you have done it. Then you can move on to that wash stall.