I have to agree with you on this. Too much risk to you, your equipment, the nephew, and the "experienced" operator. Not only do many folks not understand, but they are unwilling to listen to reason. I figure, in cases like this, they'll either heal up or stay mad. Their choice.
You did the right thing, some things are just not lendable! The only thing different I would have done for a family member or good friend would have been to say: "Sure, you can borrow it, but I'll operate it." I'm not expecting any $$ for my time, but you'll need to pay the transport and fuel costs. That is, if I had the time.
No apology needed. If the guy wants a pool that bad, let him hire an excavator.
Backhoes can be rented.
You did right because if things really go down the chute and lawyers get involved, guess who's left holding the bag?? My daughter, niece, and grandson have all asked at separate times to use our pontoon boat. I told each of them I've never borrowed someone else's boat, even when offered to me. For that reason, I don't loan it out to anyone. I did offer the use of my little 12' fishing boat with a 15 HP Evinrude motor that is almost 60 years old. They didn't seem to think that was quite the same as the 'toon. I guess I'm just too old to understand, LOL!!!
Too many $s and too much liability involved. You made the right call.
I'd have done the same thing... in fact, I've done just that kind of thing with my Farmall 400. The only person who's used it besides me, grew up on an old M doing farm work with his family. I actually trust that man to know what he's doing (even if he did get the thing stuck on his first run with it...lol. he did dig it out himself however). Either I go with the machine to run it, and they pay for travel expense & fuel, or it stays at home. There's just too much risk these days.
Not to knock your nephew, but if he can pay you rent on the equipment, why doesn't he just go to an equipment rental store and save all the grief and hard feelings with family? Sounds to me like there's more to this than what you've been told?
I've seen the damage an "experienced operator" can do to a backhoe. I used to work on rental equipment and had to rescue a few different units, the worst was a mini excavator though. The guy was side-hilling it and ripped a track off half a mile out from where I could drive in to. I had to pack a lot of gear in and out of there.