Interesting! At my old PL, we used to have an activities co-ordinator in a Senior Citizens home come in and borrow tapes all the time to show her residents/ We used to advise her of the copyright concerns--which she would routinely laugh off. I decided that we couldn't determine, in any given transaction, what was for her own private use and what might be, in effect, abused. And I advised staff to not even ask. But since the issue had at least come up with the patron, I guess it would be possible that the library could, by some legal reasoning, be held responsible.
I had my doubts about how good--or imaginative--a activities person she must have been.