Texas Supreme Court May be Inclined to Grant Chapter 87 Immunity to Employers

If the Texas Workers' Compensation Act and the Texas Farm Animal Limitation of Liability Act got into a fight, who would win?  The Supreme Court of Texas might have just metaphorically placed its money on the farm animals.

The Court held last week in Texas West Oaks Hosp. v. Williams, that an employee of a nonsubscriber hospital employer must comply with the procedures set forth in the Texas Medical Liability Act (i.e. the progeny of the 2003 tort reform movement), and barred the employee's claims against his employer.

If I haven’t already lost you, you are probably thinking,

Wait a minute, what is a “nonsubscriber”, and what does a case about a hospital employee have to do with the horse industry? 

Bear with me, this material is sort of complicated, but I hope the point of this post will be clear to you by the time you get to the end (if you in fact make it that far!)

Nonsubscriber Status. Are you a nonsubscriber?  Most Texas horse industry employers are “nonsubscribers”, at least for some of their employees.  If you have employees or so-called “independent contractors” who might really be employees under the true legal definition, you should be aware if you are or are not a nonsubscriber. 

Why does it matter? The Texas Workers’ Compensation Act allows employers to elect whether or not they will subscribe to worker’s compensation insurance.  If an employer does subscribe and an employee is hurt during the scope of their employment, the employee is generally precluded from filing suit, and must instead pursue administrative remedies for benefits under the Workers’ Compensation Act. 

But if an employer elects to forego workers’ compensation coverage, it is subject to suits at common law for injuries suffered by employees on the job. Not only that, nonsubscribers are generally not able to avail themselves of many common-law defenses to negligence claims in suits brought by employees. See this prior post for more details. 

That said, I should note as an aside that some “farm or ranch employees” are excluded from the provisions of the Workers’ Compensation Act altogether (did I mention before that this is complex stuff?).

So here’s the question that remains unsettled: What if a nonsubscriber employer is sued by an employee, and the employee’s injuries arose from dangers inherent in an equine activity? Can the employer invoke the immunity from liability granted to virtually all people in the Farm Animal (formerly Equine) Limitation of Liability Act (um...we'll just call it Chapter 87)? 

As we have discussed at length, the Supreme Court has not yet decided this issue. Two appellate courts have indicated a willingness to apply Chapter 87 to bar suits brought by horse industry independent contractors, but one court of appeals refused to apply Chapter 87 to bar a suit brought by a horse industry employee. 

Plaintiffs’ lawyers who represent injured employees generally assert the argument that Chapter 87 was intended to apply to tourists or consumers, and not workers. They further assert that Chapter 87 cannot bar employees’ suits because it would abrogate employer duties under the Workers’ Compensation Act.  The employee's lawyers in Williams made similar arguments about the Medical Liability Act.

The Williams DecisionWilliams is significant to the equine industry, at least in my mind, because it shows a willingness on the part of the Supreme Court to allow “tort reform” type statutes to bar an employee’s claim against a nonsubscriber. Not unlike the Medical Liability Act, Chapter 87 is another law that was passed to limit liability for certain types of claims. Furthermore, the plain language of Chapter 87 itself does not exclude suits brought against nonsubscriber employers (though it does expressly carve out other stuff, such as activities regulated by the Texas Racing Commission).  As such, I predict that if the Supreme Court of Texas ultimately takes up the issue, it is inclined to rule that Chapter 87’s immunity provisions apply to employees and other workers (subject to its exceptions, of course) .

Related posts:

Are Employers Immune from Liability for Employees’ Horse-Related Injuries in Texas?

Another Appellate Court Holds Chapter 87 Immunity Act Applies to Suits Brought by Independent Contractors

Update on Young v. McKim

Are Employers Immune from Liability for Employees' Horse-Related Injuries in Texas?

In general, a defendant can only be immune from suit in a Texas horse-related injury case if the plaintiff was a “participant in a farm animal activity or livestock show” when the injuries occurred.

Chapter 87 of the Texas Civil Practice & Remedies Code (the “Act”) was amended in 2011 to, among other things, include farm animals other than equines. However, the “participant” requirement did not change in 2011.  Neither the former nor the current version of the Act specifically states whether or not employees of equine activity sponsors are considered “participants in a farm animal activity or livestock show” under the Act.

The 1st Court of Appeals in Houston is the only Texas court to have taken up this issue (Dodge v. Durdin, 2005).  In that case, Deborah Dodge sued her employers, Magestic Moments Stables, et al, after a horse kicked her in the abdomen as she was administering paste-wormer at the direction of her employer. Dodge claimed that she incurred $4,000 in medical bills as a result of her injuries, and that her employers’ negligence was the proximate cause of her damages. 

Majestic Moments claimed that Dodge's suit was barred by the Act.  The trial court agreed, and dismissed the case.  On appeal, the 1st Court of Appeals disagreed that the Act applied to an employer / employee relationship.

This warning sign should not be a "news flash" to anyone.

Citing its review of legislative intent, together with the duties assigned to Texas employers under the Texas Labor Code, the 1st Court of Appeals held that, “the Equine Act applies to consumers and not to employees and that Dodge is therefore not a ‘participant’ under the Equine Act.” 

Workers’ compensation did not cover Dodge’s alleged injures. Unlike employers in many states, Texas employers are able to opt out of the workers’ compensation system. For more information, see this post.

In Dodge, the 1st Court of Appeals noted that the only other Texas court to have addressed the definition of “participant” was the Corpus Christi Court of Appeals in Johnson v. Smith (2002). In that case, the Corpus Christi court acknowledged that an independent contractor—not an employee—in charge of breeding and handling stallions was a participant under the Act.  The 1st Court of Appeals distinguished the Johnson case from the Dodge case on its facts.

Neither the Dodge nor the Johnson case were appealed to the Supreme Court. 

The Texas Supreme Court has not yet addressed whether or not an employee or independent contractor who is injured while working with horses on their employer’s premises is a “participant” for purposes of the Act.  Until the Supreme Court takes up this issue or the Legislature clarifies it, this issue continues to be somewhat unsettled in Texas. Texas equine businesses should therefore not rely upon the Act to provide immunity from suits brought by employees or independent contractors. 

Businesses can take several steps to minimize liability risk in this area, including 1) procuring insurance to cover employee or independent contractor injuries; 2) having employees or independent contractors sign liability releases; and 3) forming limited liability entities through which employees and independent contractors are retained.

A special thank you to reader Lois Mermelstein, Esq. of Austin, Texas for submitting this topic suggestion.

Top 5 Considerations for a Horse Sale Agreement with a Trial Period

If you are thinking about buying or selling a horse on a “trial basis”, or if you are entering into a horse sale agreement with a trial period, here are five of the most important things you should consider:

1)      The Timing of the Pre-Purchase Exam.  The most important consideration in horse sales is usually, “is the horse sound”?  If the horse is not sound enough to perform the intended tasks of the prospective buyer, the prospective buyer shouldn’t be taking it “on trial” anyway.  It doesn’t happen often, but a horse can sustain an injury or get sick during even a short trial period.  Therefore, the pre-purchase exam should be conducted before the horse is ever taken by a prospective buyer to “try out.”  If a question is ever raised as to whose possession the horse was in when the horse was injured or got sick, both parties will be informed of the horse’s condition when it left the seller’s property if the pre-purchase exam is conducted before the horse leaves.  See the following posts for more information on the types of tests that should be conducted in a pre-purchase exam.

Guest Post:  Top 10 Pre-Purchase Exam Considerations

Tips for Equine Pre-Purchase Exams

2)      Insurance.  If the horse is nice / expensive, the seller should insure it for mortality and major medical before the prospective buyer leaves with the horse.  Note:  Sellers should speak with their insurance agent to make sure the seller’s insurance will cover incidents that occur during the trial period.  If the seller’s insurance will not cover the trial period, good equine insurance agents can often sell the prospective buyer a short-term insurance “binder” that will cover incidents that occur during the trial period.  These short-term "binders" may be extended by a formal policy if the prospective purchaser decides to keep the horse.  If the prospective buyer purchases an insurance “binder”, the seller should be named as additional insured.

3)      Written Purchase & Sale Agreement.  All terms of a purchase agreement “on trial” should be reduced to writing.  Among other things, the specific term of the trial period should be set out, as well as who will bear the risk if the horse is injured or dies during the trial period.  A “security deposit” can also be provided for in the agreement, along with specifics on when the seller can keep the deposit and in which instances the deposit will be refunded to the prospective buyer.  The bill of sale (which transfers title to the horse) and the registration papers should not be signed over until after the trial period has expired. 

4)      Liability Release.  The seller should consider having the prospective buyer sign a release of liability should the prospective buyer or its property be damaged during the trial period.  This will not cover injury to third parties in most instances.  A seller can procure a liability insurance policy to cover accidents involving the horse and third parties.

5)      Location of Horse During Trial Period.  A seller should have a prospective buyer agree in writing as to a single location where the horse will be kept during the trial period.  The seller can deliver the horse to said location or make other arrangements to either approve or disapprove the living conditions of the horse before the horse is released to the prospective buyer.  If the prospective buyer intends to board the horse with a third-party, it is wise for sellers to make sure that the prospective buyer pre-pays board for the trial period in advance.  This is to guard against stableman’s or agister’s liens being placed on the horse if the prospective buyer does not pay board during the trial period.

Due to all of these concerns (and others), I do not typically recommend that prospective buyers or sellers enter into "trial period" sale agreements.  In the best case scenario, a seller would allow a prospective buyer to inspect the horse as much as needed prior to the sale, either 1) on the seller's premises;  or 2) at some other venue to which the seller would transport the horse for purposes of inspection.

This post was in response to a special request I received from a reader for a blog post on horse sales with trial periods.  I’m kind of like one of those music groups that takes requests as long as the song is in their repertoire, and I don’t even ask for tips in return!  So please contact me if you have any special requests for a blog topic.  I’m always looking for good content that will be helpful to my readers.

Follow me on Twitter @alisonmrowe 

Guest Post by Russell Cawyer: Does Your Farm Need to Purchase Worker's Compensation Insurance?

Russell D. Cawyer, a lawyer in my firm who publishes the Texas Employment Law Update, offers the following insights on the decision many horse farms are faced with...do you need to buy worker's compensation insurance?

"Most farm, ranch and horse owners are employers to some extent or another. Whether employing stable workers, trainers, or other labor, most of these relationships would be legally classified as employment (rather than independent contractor) relationships–even if the services are on a short-term or infrequent basis. The purpose of this post is to discuss the differences between employers that are worker’s compensation subscribers and those that are nonsubscribers.

Worker’s compensation is a form of insurance purchased by employer to provide coverage for medical expenses, partial income and disability benefits for an employee suffering an injury or illness arising in the course and scope of his or her employment. In Texas, employers are permitted to opt-out of the state worker’s compensation. These employers are called nonsubscribers. There are advantages and disadvantages

The primary advantage of worker’s compensation coverage is that workers compensation subscribers (i.e., employers having workers compensation insurance coverage) cannot be held liable in court for employee injuries or illnesses that occurred in the course and scope of the employee’s employment. This protection does not apply to individuals who are independent contractors of an employer. The primary disadvantage to worker’s compensation coverage is its cost. Another disadvantage is that worker’s compensation subscribers cannot discriminate or retaliate against employees who report or have workplace injuries, and employees can sue employers if they experience an adverse employment action shortly after reporting or having a worker’s compensation claim.

Nonsubscribers, on the other hand, cannot be sued for discrimination or retaliation for taking adverse action against an employee that has been injured on the job.  They can, however, be sued by the employees for negligence and gross negligence when they are injured at work. The law is written to encourage employers to purchase workers compensation insurance. Consequently, nonsubscribers have few defenses to these claims such as claims for contributory or comparative negligence (aka “proportionate liability”) where liability is apportioned between the employer and employee based on percentages of relative fault. The only defenses a nonsubscriber has is that the employee was the sole cause of the injury or was intoxicated at the time. 

Understand that your general liability, homeowners or umbrella insurance policies alone do not provide coverage employee injuries or illnesses. Most such policies have exclusions that do not cover claims made by employees or those otherwise providing services for the employer (i.e., independent contractors). Whether to purchase worker’s compensation insurance is an important business decisions and the pros and cons of that decision should be weighed carefully."

Horse Insurance 101: Special Event Liability

Special Event Liability insurance will be the final topic of this week's discussion about the various types of equine liability insurance available for purchase.  If you are hosting an event such as a clinic, a roping, a show or a trail ride, you should consider buying insurance.

Special Event Liability insurance typically extends to the organization putting on the show and its members.  Show officials, committee members, judges, course designers and premises owners can usually be included as additional insureds (and I recommend getting coverage for all of the above, if applicable).

If considering Special Event Liability insurance, ask your agent what types of incidents are covered and what parts of the premises are covered.  Many accidents that occur at a horse event do not involve horses and do not happen in the arena.  I know of one instance where a horse show sponsor was sued in connection with a golf cart wreck in the parking lot.  As such, the Equine Activity Laws will not always provide a defense so you need to make sure you have insurance coverage.

Also, make sure that claims made by spectators and guests (not just participants) are covered under the policy.

In addition to Special Event Liability insurance, I recommend that event sponsors1) post the Equine Activity Law signs at the event; and 2) have each participant sign a liability waiver form that is a separate document from the entry form.

The "downside" for some sponsors (depending on the event) is that the liability carrier may prohibit the sponsor from allowing dogs or alcohol on the premises during the event.  Even if the sponsor is not selling alcohol, that "col'beer" in people's private ice chests in their pickups might be disallowed under the insurance policy.  So add dogs and beer to the list of things to discuss with your agent to make sure you're covered.

Photo credit:  Eric Ashford (Flikr)

Horse Insurance 101: Commercial Equine Liability


If you board, breed, race, train, give riding lessons or conduct any kind of business-related equine activity, I highly recommend that you consider a Commercial Equine Liability policy. 

Homeowner’s and standard Farm & Ranch insurance policies completely exclude your equine business pursuits. 

Commercial liability insurance pays the damages for liability imposed upon you or your business by a liability claim or court judgment.  It also pays the cost of defending you when a lawsuit is brought against you.

This policy kicks in when an accident occurs and someone is hurt, regardless of whether you own the horse involved.

However, the basic Commercial Equine Liability policy does not cover claims for damage to property in your care, custody or control.  If someone claims, for example, that you injured their horse in the course of training it, you would need a Care, Custody & Control policy to cover that damage claim.

The Equine Activity Laws may help you provide a defense in the event of an equine incident, but they will not prevent you from being sued.  Without adequate liability coverage you will have to pay damages and defense costs yourself.  And the Equine Liability Laws only cover “inherent risks” in equine activities.  Some plaintiffs are able to successfully argue that their situation did not involve an “inherent risk”.  In other words, you could lose the case.  It bears repeating that defense costs are generally not recoverable by defendants in Texas lawsuits.

Commercial Equine Liability policies are designed to help protect you if you are sued by a third party who is injured or whose property is damaged.  A third party is generally someone who is not a family member or employee. 

If you have employees, you should consider carrying workman's compensation insurance as they are not covered under the general liability policy.  You should also make sure that any independent contractors that work with you show proof of their own liability insurance and ask that you be named as an Additional Insured on their policy.  This is especially true if you have an independent instructor or trainer working at your facility.

In addition to this policy, I recommend that all equine businesses 1) post the applicable Equine Activity Law in your state in conspicuous areas in your barn and on your property; and 2) have each third party who uses your facility sign a liability waiver that contains a covenant not to sue and specifically waives liability for ordinary negligence.   

 

Photo credit:  Katarina 2353 (Flikr)

Horse Insurance 101: Care, Custody & Control

Care, Custody & Control insurance is meant to cover people who board or train horses or are otherwise responsible for other people’s horses while breeding, showing, or racing them. The policy pays sums you are legally obligated to pay to others for death, injury or theft of horses in your care, custody, or control.

Example: a boarder’s horse dies of colic while it is at your barn, and the owner sues you for negligence.

Almost all general or commercial liability policies exclude coverage for injury or death to any horse in your care, custody or control.

This coverage does not apply to horses you own or lease, which typically are covered by a mortality policy.  Also, a Care, Custody & Control policy also does not cover you if a third-party’s horse in your care injures someone or damages their property. The Care, Custody & Control policy only protects you against claims of damage or loss of the third-party’s horse itself.

The policy typically pays for damages to horses and defense costs for suits brought against you. Premiums are usually based upon the average number of horses in your care or the total number of horses in any one barn, whichever is greater.

The basic policy also covers you if a horse is injured during incidental transit (hauling) of horses. “Incidental transit” is usually defined as 6 trips of 150 miles or less per year. The mileage restriction can usually be eliminated for an additional premium.

This coverage is especially recommended for trainers due to the multiple ways a horse can be injured in the course of a training program.

In addition to a Care, Custody & Control policy, I also recommended that trainers and boarding facilities get a written agreement with clients that includes 1) a “risk of loss” clause where the client assumes all risk of loss or injury to the horse; and 2) a veterinary power of attorney whereby the client agrees that the trainer or boarding facility has the discretion to provide veterinary care if the owner cannot be contacted.

Photo credit:  Markus Shaltrin

Horse Insurance 101: Farm and Ranch

In yesterday’s post, we talked about the Private Horseowner’s Liability policy and discussed the ways it might cover a horse owner for liability claims that are not covered by a basic farm and ranch policy. Does that mean that holders of PHO policies do not need a farm and ranch policy? Not necessarily.

A basic farm and ranch policy can be compared to an extended “homeowner’s policy” for farm or ranch owners. Although many insurance companies allow clients to customize their farm and ranch policies to cover additional perils, the basic farm and ranch policy typically covers the following instances:

  •  Loss of your home or certain types of damage to your home;
  •  Loss of your barn or outbuildings or certain types of damage to your barn or outbuildings;
  •  Accidental death of your horses caused by lightning, fire, predator attack, accidental shooting, or drowning;
  • Liability claims brought by third parties who are on your property with your permission and the incident did not happen in connection with your equine business operations; and
  • Medical bills for third parties who are on your property with your permission are are injured from an occurence that did not arise from your equine business operation.

The basic farm and ranch policy does not typically cover the following instances:

  •  Incidents that do not occur on your property; 
  • Liability claims for medical bills or damages brought by family members or employees;  
  • Horses that die or have to put down due to injury or sickness;
  • Accidents caused by horses that do not belong to you; and
  • Accidents that arise from your equine business operations.

For people who own a farm or ranch, a basic farm and ranch policy is usually a good idea. This type of policy should be considered in lieu of the basic homeowner’s policy due to the additional coverages available.

But there are many ways in which a farm owner can be held personally liable even when covered by a basic farm and ranch policy. Therefore, it is advisable to ask your insurance agent exactly what is covered so that additional insurance can be purchased, if necessary.

The most important thing to remember is that if you are sued, you want to be covered by insurance. No matter how frivolous or unmeritorious the claim, you will still have to hire an attorney to defend you. Legal fees are costly, and usually not recoverable by defendants in law suits.

Horse Insurance 101: Private Horseowner's Liability (PHO)

Many lawsuits involving horses can be avoided altogether if the right insurance policy is in place. Or, if a lawsuit cannot be avoided, a horse owner with the right insurance policy does not have to rack up $75k plus getting their case to trial and face a potential judgment of thousands or millions of dollars.

Remember, posting the Chapter 87 Equine Activity Act sign, setting up an LLC, or getting people to sign a liability waiver does not immunize you from suit.  If you are sued, you will still have to pay a lawyer to defend you even if you eventually win the case.  In Texas, defendants usually cannot recover attorneys' fees in court.

So, the theme this week is equine insurance.  Do you need it and what kind do you need?

In the May 2010 Issue of SuperLooper, insurance specialist Amy J. Daum talks about Private Horseowner's Liability Policies (PHOs).

A PHO is meant to cover you if your horse directly injures someone or damages someone's property, and you are sued.  Some examples of when a PHO might cover you are:

1) One of your horses gets out of your pasture and is hit by a car, and the motorist sues you;

2) Your horse is tied to your horse trailer at a show or roping and kicks someone's child while you are around the corner doing something else; and

3) You allow your friend to ride your best horse and he falls off when your horse stops quickly.  Your friend has no medical insurance so has to sue you to pay his medical bills.

Even if you have a farm & ranch or homeowner's policy, a PHO might cover you under circumstances that your farm & ranch policy would not.  For example, some farm & ranch or homeowner's policies will not cover you if the accident happened off your property.  Also, if an accident happens at an event where money can be won (roping, barrel race, cutting, etc), some policies will consider the event a "commerical activity" and exclude coverage.  

The really cool thing about PHOs is that they are cheap!   By way of example, PHOs with Broadstone Equine Insurance Agency start at about $130 per year for $300,000 in coverage, and $235 per year for $1million in coverage.  

Even the $1 million policy costs less per year than one hour of work for the average trial lawyer!

But PHOs are not available for everyone.  Daum says that an equine professional who teaches lessons, boards, trains, or buys and sells horses cannot get a PHO.  

Also, a PHO only covers you if you are sued by a "third party".  A third party is someone who is not a family member or someone performing services for you (such as a vet, farrier, or employee). 

An equine professional or someone being sued by a service provider could be covered by a general liability policy, a type of insurance that will be discussed in a future post.

For those horseowners who do qualify, I believe getting a PHO is worth the money.  This is especially so if 1) you haul to shows, ropings, or rodeos on a regular basis, 2) other people will frequently be riding your horses, or 2) you have any reason to believe your horses might get out and make their way onto a road.

Are Limitations Periods in Mortality or Major Medical Policies Enforcable?

Equine mortality and major medical insurance policies often contain a provision stipulating that any action or proceeding under the policy must be brought within a certain period of time, typically one year. 

Absent a contractual provision to the contrary, the statute of limitations applicable to an action based in contract will apply to an action under an insurance policy (for example, an insurance coverage dispute). 

Are contractual limitations periods in insurance policies enforceable?  Generally, courts will enforce the limitations provisions unless they violate limitations-related statutory law in the state the policy was issued or delivered, or in the state where the law suit is brought.  In rarer instances, courts have refused to enforce insurance policy limitations periods because they were judicially interpreted to be "unreasonable."

Statutory prohibitionsSome states have statutes voiding limitations periods that are shorter than a given period of time.  Thus, the limitations-related statutes in the state in which you are seeking to enforce your policy must be consulted to determine the applicability of a given provision.  Under Texas law, any contractual limitations period is void if it is shorter than two (2) years.  See Texas Civil Practice & Remedies Code, Section 16.070(a).  In Maryland, an insurance or surety contract cannot set a shorter time to bring an action under the contract than required by the state where the insurance contract is issued or delivered.  See Section 12-104 of the Maryland Insurance Code.  Maryland has a 3 year statue of limitations for contract actions.  Thus, a one-year contractual limitations period in an equine insurance policy would be void in Texas and Maryland.  Absent such statutory prohibitions, however, the contractual limitations period in the insurance contract will be enforced.

Does the limitations period in the policy cover my tort-related claim of "bad faith" denial of coverage or "unreasonable delay"?  Probably.  Many insured litigants argue that their tort claims such as bad faith are not covered under the contractual limitations period because the tort claim is not a "claim under the policy."  Although courts have entertained (and sometimes agreed with) this argument, according to insurance fraud lawyer Rick Hammond, the weight of the cases tend to enforce the statutory limitations period for all claims related to the policy.  Of course, the contractual limitations period will not apply to any claim if it is void under state law, as discussed above.

 

 

 

What if Potential Buyer Does Not Return Horse After Trial Period?

An attorney called me last week to ask what her client, a trainer, should do about a prospective buyer who had picked up a horse from the trainer to "try out" but failed to bring the horse back after the trial period.  The trainer had been hired by the horse's owner to find a buyer for the horse.  After months of trying to make contact with the prospective buyer, the trainer finally made contact to learn that the horse had allegedly died of colic while in the prospective buyer's care.  There were no written agreements between the owner and trainer or owner/trainer and prospective buyer.

The first thing I asked was whether they called the police or sheriff when the horse was not returned.  In potential theft situations, it is always advisable to call law enforcement and get a copy of their report.  I also suggested a bit of investigative work to determine if the horse was, in fact, dead.  They had called the vet the prospective buyer usually uses, but the vet had no record of seeing the horse.  I suggested that they send a letter to the prospective buyer asking for proof that the animal was euthanized and asking him to pay the asking price for the horse.  The next step was to file suit if he did not pay (I suggested that she make the trainer and owner joint plaintiffs).

Under Texas law, the trainer and owner in this situation have a colorable claim for conversion and theft under the Texas Theft Liability Act (the "TTLA") against the potential buyer.  People with ownership or possessory rights have standing on both claims. And assuming the trainer spent money to take care of the horse while in her care and was going to get a commission on the sale, the damages element is also satisfied as to the trainer.  Attorneys’ fees and costs are recoverable by the prevailing party under the TTLA.

Is the trainer liable to the owner in this situation?  The trainer would only be liable to the owner under the “principal-agent” theory if the trainer acted without actual authority when she gave the horse to the prospective buyer to try out.

What's the lesson here?  The trainer and owner would have been in a better position if they had obtained a written agreement with the prospective buyer containing a "risk of loss" provision, whereby the prospective buyer would agree to pay the owner if the horse died or was injured in the prospective buyer's care.  The trainer could have also required the prospective buyers to make payment in escrow for the horse, and agreed to return the money if and when the horse was returned.