Cindy and Sam have been long-time friends and once rode together. Now, as Sam recovers from a serious illness, his barn has been empty. He once enjoyed looking out at the horses in his pasture. He approached Cindy with an offer to stable her horses on his property for free, as long as she takes care of her horses at her own expense.
People sometimes enter into arrangements like this, but what are the legalities? What can Cindy and Sam do to protect themselves?
The sad reality is that someone could be injured as a result of the arrangement. For example:
- Cindy might forget to secure the pasture gate, and horses could wander onto the road, killing a motorist.
- Cindy's horses might bite or kick one of her guests on the property.
If either of these should occur, both Cindy and Sam are at risk of being targeted with a lawsuit. Whether or not the lawsuit has merit isn’t the issue – what matters is that Cindy and Sam will need legal representation for their defense. They might also need funds to finance a possible settlement or judgment. All of this can be expensive. By planning ahead, they can try to avoid the risks and the expenses.
Cindy – the Boarder
Here are a few options that Cindy, the boarder, can consider for her protection:
- Liability insurance. Insurance can be especially important in this arrangement, but Cindy's homeowner's insurance may not cover off-premises horses. Cindy's insurance agent can discuss insurance for her arrangement, such as Personal Horse Owner's Liability Insurance (sometimes called "Private" Horse Owner's Liability Insurance). She could also consider adding to her coverage limits by purchasing an appropriate Umbrella Liability Insurance Policy.
- Releases. Releases are never a substitute for insurance, but Cindy can require her guests to sign one (where allowed by law), and she can make sure it complies with her state law.
- Risk management. Years have passed since Sam kept a horse on the property, but Cindy can repair the fences, latches, stall doors, and pastures to make sure they are secure for her uses.
- Signs. Years have passed since Sam last stabled a horse on his property, and laws could have changed within that time. If the state's Equine Activity Liability Act required posted "warning" signs, Cindy can make sure that proper signs are posted.
Sam – the Property Owner
Sam's interests are much like Cindy's, when it comes to avoiding liability, with a few differences.
- Liability insurance. Without horses on the property in a few years, Sam may have changed his coverage and might not be protected for liabilities that Cindy's horses may cause. He can ask Cindy to include him as an "additional insured" on her policy, as long as he is satisfied with the type and amounts of her coverage. He can also require Cindy to show him proof of the insurance and proof that he is an "additional insured." He could update his own liability coverage, as well.
- Accept Payments? If Sam decides to charge Cindy a fee for her use of his stable, he risks insurance coverage problems. That is, his homeowner's liability insurance policy probably has a "business pursuits" exclusion, and the insurer might consider that small amount of board he collects each month to be a "business pursuit." (This blog addressed that topic here.) Sam can discuss with his insurance agent whether he should purchase business liability insurance. Or, if he collects no payments from Cindy, he could discuss with his agent whether his homeowner's policy provides him sufficient protection for the arrangement.
- Releases. If Sam wants to benefit from Cindy's liability release by being included in the list of released people within the document, he needs assurance that Cindy uses a well-worded document. Sam can have his lawyer review her document to make sure that it sufficiently protects him. Or, he can require Cindy's guests to sign his own release form, in addition to hers.
Lending out your property to a friend is a generous act, but the risks and legalities make careful planning important.