It’s Not All About the Hats and Juleps: Equine Law in South Carolina, 0920 SCBJ, SC Lawyer, September 2020, #34

• Author: By Jim Ritchie
• Position: Vol. 32 Issue 2 Pg. 34

It’s Not All About the Hats and Juleps: Equine Law in South Carolina

Vol. 32 Issue 2 Pg. 34

South Carolina BAR Journal

September, 2020

By Jim Ritchie

“A horse is dangerous at both ends and uncomfortable in the middle.” -Ian Fleming.

The late author of the James Bond thrillers must have had a few difficult encounters with horses in his native Great Britain. While many South Carolina Bar members’ experience is the opposite, some attorneys may echo Fleming’s sentiments. Whether you grew up on horses or have yet to spend an hour in the saddle, understanding the basics of equine law will help you recognize an equestrian client’s issues and needs – or at least make you popular at a Kentucky Derby party.

South Carolina is home to a significant and diverse equestrian community. The popularity of equestrian events, competitions and horse-related businesses is growing in many areas of the state. A recent study by the University of South Carolina reported that over 73,000 horses and ponies reside in the Palmetto State.¹ The equine sector of the state’s economy generates 22,500 jobs and produces an annual economic impact of $1.9 billion.² The modern horse world involves substantial financial investment and carries significant legal risks. Trainers, owners, riders, breeders, barn operators and event organizers need to handle their business and legal matters in ways that prefect the new reality.

A key resource for meeting these challenges is an attorney who knows horses and who understands equestrian sports and equine-related businesses. An experienced equine law attorney will identify potential liability issues, help limit risk, and provide counsel on essential state laws. They also guide clients through complex insurance, business, transactional and employment matters. Just as a horse and rider create a partnership to achieve success, an equine law attorney and his client form a team to prevent legal problems and resolve disputes.

Each of us is familiar with Rule 1.1 of the Rules of Professional Conduct that requires knowledge and skill to represent a client competently.³ To meet this standard in the equine law field, attorneys need to understand the unique challenges and specific legal issues affecting the equestrian community. If you are not familiar with equine law or legal issues and a client comes to you for advice, it is important to learn the principles or collaborate with an experienced equine law attorney.

This article will introduce several basic legal issues encountered regularly in an equine law practice including asset and liability protection, transactions, business matters, and equestrian event issues. These are only a few foundational matters. Equine law clients also regularly need guidance on tax planning, land use, investments, and litigation.

Asset and liability protection

The first thing I recommend for my equine business clients is establishing an ownership structure that protects their assets. This means creating layers of protection—typically, the first layer is forming a limited liability company or corporation or both, depending on the circumstances. It is important that the client fully explain the ownership structure of the land, barn and riding facilities so that you can address the situation effectively. It is not unusual for one person to own the land and allow a family member to operate a boarding or lesson business on the property. This situation presents two challenges: first, the attorney must recognize that the owner and the operator will have differing interests. Be certain to clearly define who you are representing so there are no conflicts; second, make sure your client establishes an entity that protects his interests and spells out the material terms of the agreement. Often, an individual or group of investors owns a commercial barn and riding facility. In this case, it is a good idea for the owners to hold the land in one entity and lease the facility to a second entity that will conduct business with the public. The agreements between the owning and operating entities should provide for full protection of the entities and the individual investors.

The second layer is liability insurance. There are a variety of polices that insure real estate, businesses, and individuals, with substantial differences in coverages. Take time to review your client’s needs and help them get the right policy in place. Good insurance will pay for itself many times over and several insurers that work in the equestrian area provide guidance and consulting free of charge to help your client find the right polices.

The top tier of protection is attained by properly using statutory protections and creating well-crafted documents.

The Equine Activity Liability Act

South Carolina has three specific statutes that establish a liability protection framework for equine law matters. They comprise what is commonly known as an Equine Activity Liability Act (“EALA”).⁴ EALAs have been adopted in a majority of the states and nearly every state’s EALA is unique. The South Carolina EALA provides liability protections for certain activities and persons and lists several exceptions to the protections to hold bad actors accountable.⁵ The statutes work together as a cohesive body of law, but the grant of immunity is predicated on the last section of the article, Section 47-9-730.

That section focuses on two specific issues: the posting of warning signs that contain specific language; and written contracts for equine activities that contain the official warning language. In addition to using the exact statutory warning language, the warning signs must be posted in approved locations, and the lettering must meet certain size requirements.⁶ If your client follows all of the requirements, they will enjoy the broad liability protection provided in the EALA. If the client does not, t hey risk serious liability exposure. Section 47-9-730(C) plainly states that the “failure to comply with the requirements concerning warning signs and notices provided in this section prevents an equine activity sponsor or equine professional from invoking the privileges of immunity provided by this article.”

Assuming your client purchased the correct signs and posted them in the statutorily compliant places on her property and used the same warning language in her releases and contracts, you can now work with her to make sure her conduct and facilities fall within the EALA. Section 47-9-710 sets forth the definitions of the key covered elements, including what is an “equine,” what is an “equine activity,” who is covered by the Act, and what constitutes “engaging in an equine activity.” It articulates the scope of the EALA’s application and sets up the operational terms of Section 47-9-720, the heart of the EALA. It lays out the protection from liability and the exceptions. In general terms: [A]n equine activity sponsor or an equine professional is not liable for an injury to or the death of a participant resulting from an inherent risk of equine activity, and no participant or participant’s representative may make a claim against, maintain an action against, or recover from an equine activity sponsor, or an equine professional, for injury, loss, damage, or death of the participant resulting from an inherent risk of equine activity.⁷

This broad protection is based on the fact that equine activities have inherent risks associated with the unpredictable nature of horses, and the potential for injury and death when engaging in equestrian sports and activities, and the widely varying knowledge and skill levels of riders. However, the protection is not unlimited. The statute lists several exceptions which are designed to protect the public from horse owners’ or equestrian professionals’ negligence or improper conduct. These include: • Providing tack or equipment that the covered person knew or should have known was faulty and “was faulty to the extent that it caused the injury;”

• Providing an equine (horse) and failing to “make reasonable and prudent efforts to determine the ability of the participant to engage safely in the equine activity and to manage safely the particular equine based on the participant’s representations of his ability;”

• Holding equine activities on land or at a facility “upon which the participant sustained injuries because of a dangerous latent condition which was known or should have been known to the equine activity sponsor, equine professional, or person and for which warning signs have not been conspicuously posted;” and

• An act or omission that constitutes “willful or wanton disregard for the safety of the participant and that act or omission caused the injury” or “intentionally injured the participant.”⁸

The exceptions also make clear that the grant of immunity in Section 47-9-720 does not provide protection against product liability claims or liability arising from injuries involving motor vehicles.

Equine business agreements

Once your client has taken the initial steps to establish a favorable ownership structure, purchased insurance and complied with the EALA, you can focus on their operational legal needs. Your client will need written agreements that provide protection, clarity and predictability. When you draft these documents, it is important to understand the legal framework used in South Carolina. One-page boilerplate templates pulled from the internet are invitations to an unpleasant meeting with your malpractice carrier.

Commercial barn operators, training centers, and equestrian event facilities interact with the public on a daily basis. A couple of common issues and agreements these types of clients require include: • Liability releases. Every “participant” as defined in Section 47-9-710 should sign a written release that complies with the warning language of Section 47-9-730. The statutory definition is broader than just the person riding the horse. Clients should have the rider’s parents, siblings, and friends who come on the property sign a release as well. This is necessary because they, too, can be considered a “participant” in an “equine activity” and, if injured on the property, bring an action for damages. The releases should be updated regularly as times and the law change.⁹

Make sure your client retains important records for the appropriate amount of time. Remember, a child who is injured in South Carolina can wait until they are 18 to assert a claim. Keeping good records of lessons, transactions, and releases is essential evidence to defend many claims.

• Written boarding agreements are vital for smooth operations. Beyond the basics —scope of boarding services, price and payment, and the term and termination— boarding agreements should address authorizing emergency vet treatment (and payment), emergency contacts, remedies for non-payment, damage caused by the horse/ owner, medications and vaccinations, and rights to terminate the agreement for violating barn rules. Anticipating serious events and putting a plan in writing may not only save a horse’s life; it can save your client’s business.

Your client should also publish and enforce a set of “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, clients should incorporate the barn rules into their boarding agreement so that if there is a serious or repetitive violation of the rules, they can take action against the boarder to remove the horse.

Equine industry 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 employment laws can save your client time and money and protect them from civil and criminal actions. In addition, many equestrian businesses and event organizers have significant interaction with young people. If your client works with children under the age of 18, additional staff and volunteer background checks and compliance with programs such as the United States Equestrian Federation’s “Safe Sport”® may be needed.

Equestrian professionals need special attention

When your client has equestrian professionals such as trainers, farriers, or performance therapists providing services at their direction, they need a plan to handle those legal relationships. If the equestrian professional is based on the property or provides services there regularly, it is crucial to have a written independent contractor agreement or employment agreement, as the situation dictates. The agreement needs to set out the duties, responsibilities, compensation, and liability terms. Without such an agreement, your client may be exposed to business and tort liability under agency law. Independent service providers should also sign a liability release, especially if they are treating horses from multiple owners.

In addition to employment issues, a second risk area involving trainers is horse leasing and sales. Trainers regularly assist buyers and sellers in these transactions. They need to firmly establish who they represent to avoid conflicts of interest and potential liability. No trainer wants to face accusations by a disgruntled buyer or seller over a lack of transparency. A trainer can protect her reputation and her business with clear agreements that anticipate conflicts, shield her from liability, and provide a remedy for disputes.

Buying, selling or leasing a horse? Get it in writing!

Given the significant costs of horses in every equestrian discipline at virtually every level, the traditional “handshake” deal is, unfortunately, a formula for disaster. Resolving disputes where there are no written agreements can be expensive and complicated. Your client can avoid these problems by using thorough written purchase or lease agreements. Essential terms include price and financing, details on the horse and its performance capability, trial period terms, transportation and the risk of loss before purchase, veterinary history, pre-purchase exams, insurance, all relevant disclosures about the horse, disclosures about the agents involved and any commissions being paid, and a Bill of Sale. This level of detail and transparency gives the parties confidence in the process and minimizes the potential for disputes.

Liability protection terms should also be incorporated into these agreements. Allocating responsibility in these matters is important to make sure all parties understand their risk and legal duties. In the absence of such provisions, pricey and messy battles often ensue when there is a dispute. For an equine professional not only is that a potentially costly legal problem, it can also mean public relations trouble for their business and a serious operations distraction.

Horse owners using private land have particularly tricky issues

One question that often arises i s whether a homeowners’ policy cover claims by a person who is injured by the insured’s horse. If your client boards horses for others or gives lessons at his personal farm, those pursuits are often considered business matters and personal coverage may be denied. There are also situations where friends or relatives want to ride the owner’s horse or to keep their horse at the owner’s farm free of charge. Asking them to sign a release can be awkward, but the owner should do so if he wants legal protection. Should horse owner post the EALA warning sign on his private land even though he is not operating a business? Yes!

Trusts and estate planning for equestrians

It is becoming increasingly popular for equestrians to set up a revocable or testamentary trust for their horses after the owner’s death. Succession planning for the care and support of a beloved equine family member requires thoughtful consideration in selecting a qualified and willing trustee and ensuring proper funding of the trust. Section 62-7-408 establishes the general terms of creating a trust for the care of animals. It leaves the drafter significant latitude to meet the needs of the settlor. When crafting a trust document or will, the attorney should have the owner provide detailed guidance to the trustee for the care of the horse and reasonable flexibility to address unforeseen issues. More importantly, the trust needs to provide proper funding for the long-term care of the animal. In the event that the horse outlives the money available for support, the trustee needs direction on donating or selling the horse. Similarly, the owner should name a remainder beneficiary should there be money left in the trust after the death of the horse. Many owners select an equine rescue or other charitable organization to handle either of these situations.

Equestrian associations and event organizers and sponsors

The South Carolina equestrian community is filled with active nonprofit organizations. They operate rescues, competitions, 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 may encounter significant legal issues. In addition to regular business and employment law issues, a nonprofit corporation must comply with the state’s Nonprofit Corporation Act (the “Act”).¹⁰ 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 flings, and membership structures. All of these documents and procedures should be reviewed and updated regularly by experienced counsel to protect the organization and facilitate its successful operation. If the documents do not comply with the Act, o r 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. In addition, by failing to adhere to the Act’s requirements, the organization’s charter can be revoked by the Secretary of State.

The equine activities produced or undertaken by some nonprofits often expose the organization and the individual volunteers and board members to significant liability risks. To address this challenge, layering protection is again the preferred course. This is achieved by creating and maintaining up-to-date governing documents, establishing and following internal procedures that comply with the Act, and purchasing public liability insurance and Directors and Officers liability insurance. By using strong internal documents and adding insurance protections, the organization will be better able to meet its mission and encourage talented volunteers to actively serve.

Event organizers and sponsors play a key role in the equestrian world. They create competition and recreational opportunities that range from local trail rides to international horse shows and races. To facilitate the continued growth of these events, sponsors and organizers need to secure appropriate releases, indemnity agreements, licenses, permits, and vendor contracts. An annual “legal audit” of their situation each year is helpful to identify issues that need attention. Based on the audit, an attorney can follow the steps discussed in this article to layer protection and develop transactional agreements to address their client’s needs.

Participation in equestrian activities carries a certain amount of safety risk; however, an experienced equine law attorney can help clients significantly reduce their legal and financial risks. Good planning and practical agreements can protect their client’s assets, limit liability, promote transparency in their dealings, and manage employment and business matters effectively. By providing these services, members of the South Carolina Bar can do their part to keep equestrian activity growing and improving in South Carolina for years to come.

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Notes:

[1] Univ. of S.Car., The Economic Impact of the Equine Section on South Carolina: A report by the Univ. of S.Car. for The S.Car. Dep’t of Agriculture (Mar. 14, 2019), available at https://agriculture.sc.gov/wp-content/up-loads/2019/03/2019EquineImpactStudy.pdf.

[2] Id.

[3] SC Rules of Prof’l. Conduct r. 1.1 (2019).

[4] See S.C. Code Ann. § 47-9-710, et seq.

[5] Id.

[6] See S.C. Code Ann. § 47-9-730.

[7] S.C. Code Ann. § 47-9-720(A).

[8] § 47-9-720.

[9] For example, in light of the COVID-19 pandemic, attorneys should consider adding language that addresses the spread of communicable viruses and potential liability.

[10] S.C. Code Ann. § 33-31-101 et seq.

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