We Have a Signed Release of Liability! Why Are We Still Being Sued?
We’ve all seen exculpatory clauses. On the back of your ticket to a theme park, for example, exculpatory clauses seek to contract away responsibility for injury in exchange for your use of the facility. It’s a waiver and release before anything even happens.
These clauses are used in a number of business contexts. You can find these clauses in commercial real estate leases and agreements providing business and consumer services.
Courts Don’t Like Them
But the courts dislike them. The Florida Supreme Court states that public policy disfavors exculpatory clauses because “they relieve one party of the obligation to use due care and shift the risk of injury to the party who is probably least equipped to take the necessary precautions to avoid injury and bear the risk of loss.”
As a result, Florida law requires that such clauses be strictly construed against the party claiming to be relieved of liability. Therefore, to be enforceable, the language of an exculpatory clause must be so clear and understandable that “an ordinary and knowledgeable person will know what he is contracting away.”
There Are a Number of Reasons Exculpatory Clauses are Rendered Unenforceable
The ambiguity created by conflicting contractual language will defeat these clauses. Yet ambiguity is so easily avoided if care is taken when drafting contracts. Failure to do so can lead to an unfortunate surprise if you are seeking to escape liability based on an exculpatory clause.
In a recent case out of Miami-Dade County, Obsessions in Time v. Jewelry Exchange Venture, the appeals court reviewed lease provisions that sought to relieve the landlord of liability for the theft of valuables held for the tenant in Jewelry Exchange’s vault.
The lease to Obsessions in Time allowed it to use a safe provided by the lessor, Jewelry Exchange. Obsessions sued when it lost $2,000,000 in jewelry when an employee of Jewelry Exchange allowed unauthorized parties to access the safe. The commercial lease provided:
[the lessor] shall not be liable for any loss or damage to the contents of the vault within the premises caused by burglary, fire, or any cause whatsoever … . [T]he sole liability of the lessor hereunder is limited to the exercise of ordinary care to prevent the opening of said vault [by unauthorized parties].
This language, therefore, provides that while the landlord is not responsible for “any loss or damage”, it is responsible where it fails to “exercise ordinary care”. The court held these two clauses of the lease agreement irreconcilable, ambiguous, and unenforceable.
That was bad news for the landlord since it had the trial court dismiss the tenant’s commercial litigation action. Instead, because of this conflicting language, the lessor found itself back in court defending a breach of lease over millions brought by the tenant.
More Contract Drafting Errors
The court outlined a number of failed attempts to contract away liability to further illustrate the point.
Sunny Isles Marina owned and operated a marina and dry storage facility. Adulami and other customers owned boats stored at the marina under boat storage agreements that included an exculpatory clause. A fire broke out causing damage to several boats. Adulami and other boat owners filed insurance claims alleging Sunny Isles’ faulty battery charging system caused the fire that spread. Sunny Isles sued seeking a determination that it was relieved of all liability based upon its exculpatory clause which provided:
RISK OF LOSS. The Marina shall not be liable in any way for any loss or damage sustained by Owner … which arises out of any cause not attributable to the willful gross negligence of the Marina…
But Sunny Isles also included additional terms.
INDEMNIFICATION. The Owner hereby waives any right it has to claim any damages or other loss or liability from the Marina … whether the same results from any act or neglect of the Marina [or other parties].
How can the Marina be liable for “willful gross negligence”, if its customers waived their claims for “any act of neglect”? The trial court dismissed Sunny Isles’ lawsuit and the appeals court agreed. The exculpatory clause was unenforceable and the boat owners were clear to sue the marina.
You’re Waiving Your Rights to Sue Me, But We Do a Great Job!
The next two cases illustrate that you should just stick with exculpatory language and not try to make people feel too good about your services.
Murphy brought a personal injury action for negligence against the YMCA. The trial court entered summary judgment against Murphy based on the following membership application release language:
I am an adult over 18 years of age and wish to participate … I understand that even when every reasonable precaution is taken, accidents can sometimes still happen. Therefore … I release the … YMCA and its staff members from … any claims based on negligence…
If the YMCA did not take “every reasonable precaution”, how can they be released from “any claims based on negligence”? The surprise result for the YMCA was that the appellate court reversed the trial court, held the release unenforceable, and sent the case back to continue against the YMCA.
Finally, Brooks sued Dr. Paul for negligence after spinal surgery. The trial court dismissed the lawsuit based on the exculpatory clause in the release executed by Brooks before surgery:
As of January 1, 2003, [Dr. Paul] will not carry any medical malpractice insurance. … I hereby … agree not to sue [Dr. Paul] for any reason [because] I realize that [Dr. Paul] will do the very best to take care of me according to community medical standards.
Maybe you can see why the appellate court sent the case back to the trial court to continue against the doctor. Could the doctor insist that suit could not be brought against him “for any reason” even if he failed to do his “very best to take care of” his patients?
The appeal court found the language ambiguous and unenforceable. In fact, the court wondered what the purpose of the last clause was if the doctor did not want to be sued for any reason.
Words have meaning. When it comes to exculpatory clauses, those words are reviewed under a microscope. Take a deeper look at these clauses. They may be shallower than you think.