A backyard horse owner named Jane boards a few horses during the winter. Jane’s facility has box stalls and an indoor arena, making it desirable during the snowy winter months where Jane lives. Jane doesn’t view her activities as a business. She views herself as earning some extra money and helping friends.
What could go wrong? Plenty.
Legal Standards Can Be Higher for Businesses
In the eyes of the law, even if Jane’s business is intermittent, it’s still considered to be a business. Consequently, if a customer or business visitor is injured, a lawyer will seek to hold Jane to the standards of a business. This can be a problem with premises liability cases (such as slip and fall cases). For example, if a visitor or customer slips and falls on ice in the barn’s parking area, and accuses Jane of failing to take reasonable precautions, that lawyer will likely seek to hold Jane to a higher standard of care that businesses owe their customers.
People in Jane’s situation sometimes assume that boarding contracts and releases are all they need for protection against claims and suits, but that assumption is wrong. One day, a boarded horse might escape from the pasture, wander onto a nearby road, and injure or kill a motorist (who never signed a contract). Adding to the problem, even if Jane tried to invoke "indemnity or hold harmless" language in her contracts and expected a boarder to pay her legal defense costs and more, the boarder probably lacks the funds to do so.
If Jane is not insured for a business activity on her property, she’ll likely have no coverage under her homeowner’s insurance policy for the boarder’s slip and fall claim or the motorist’s injury claim because homeowner's insurance policies usually have a "business pursuit" exclusion, which prevents coverage. Now Jane is forced to retain a lawyer at her own expense. Worse, a judgment against Jane, if not paid, could potentially result in the party suing her forcing a sale of her property and assets.
Here are some ideas to consider for those seeking to board a few horses on an occasional basis:
- Check with your insurance agent to make sure you're protected. You’ll need to purchase some form of commercial liability coverage or policy endorsement.
- Have all visitors to the facility of legal age sign waivers/releases (where allowed by law). Have all boarders sign properly worded boarding contracts. Determine whether your state Equine Activity Liability Act requires special "warning" or other language in your contracts, as these laws often impose contract language requirements on equine businesses.
- Check your property, including stall and fence areas, before boarders bring over horses to make sure you're comfortable with their condition.
- Understand the obligations expected of you when you operate a small business such as inspections or property and arrangements to respond to possible hazards on the property.
- Determine whether Equine Activity Liability Act "warning" signs should be posted on or near your property, as these laws often impose these requirements on equine businesses.
- Discuss with your lawyer whether you should set up, and manage, a corporation or LLC for your small equine business activities.
- Remember that releases do not substitute for liability insurance. Because people who sign releases can, and sometimes do, file lawsuits, make sure you are properly insured.