Reopening the Economy and Getting Back to Business: Will Liability Waivers Protect My Business?

Last week, in our blog post entitled Reopening the Economy and Getting Back to Business: Business Owners’ Liability Risk When Dealing with Customers and Others, we talked about the various considerations and risk mitigation steps that businesses must navigate in determining when and how to reopen during the pandemic.  We discussed the importance of knowing the scope of your insurance coverage, following state and federal reopening guidance, implementing appropriate training, and the necessity to avoid overselling the steps that you are taking to protect your customers. In this blog, we will discuss the use of liability waivers, and how they may provide some protection to your business as America returns to work.

An obvious measure that a business may consider to mitigate the risk of reopening is to require visitors to execute a liability waiver.  The waiver would seek to limit the claims or damages that a visitor could pursue against the business in a later lawsuit.  For example, a retailer might require customers entering the establishment to sign a waiver before shopping or a business could require contractors to sign a waiver before performing any work on the premises.  Liability waivers are considered contracts and in many circumstances are enforceable.

The general rule is that agreements which exempt a party’s liability for future negligence are valid and enforceable. Thus, individuals can generally contract away their ability to sue for claims arising out of another’s negligence, provided that the agreement is properly drafted and not contrary to public policy.  However, it is important to understand that some states view liability waivers more favorably than others, and there are a few - Connecticut, Montana and Virginia – that reject such waivers.

While the law on waivers varies from state to state, certain principles apply in most circumstances.  In order to be enforceable, waivers must be clear and unambiguous, and must be fairly bargained for between the parties. Customers must be able to understand the risks associated with the services being provided as well as exactly which rights they are waiving under the agreement. One court has said this means that waivers must be “fairly and honestly negotiated.”  Another has said that the agreement must be “clear and unambiguous” to ordinary persons.  Thus, many states require that the term “negligence” or equivalent words be used in the agreement.  And, courts will strictly construe liability waivers against the party who drafted the agreement, so businesses must be very precise in the in such agreements.

Even the best drafted waiver is not likely to insulate one from liability arising out of some types of claims. Most states prohibit a waiver of liability for willful and wanton conduct, reckless or intentional conduct, as well as gross negligence.  Gross negligence is typically viewed by the court as that conduct which is an extreme deviation from the ordinary standard of care or a conscious disregard for the rights and safety of others. Similarly, lawsuits alleging the intentional torts such as fraud would ordinarily not be protected by a waiver.

Courts will also refuse to enforce waivers of liability in situations where the conduct involved implicates a strong public policy for protecting the public, or in which the public has a compulsion to participate in an activity but no opportunity to negotiate the terms of participation. These public policy exceptions to the enforceability of waivers tend to arise in the following situations: 

1. In the context of an employment relationship, where liability waivers cannot insulate employers from engaging in discriminatory or wrongful conduct toward employees. 

2. Where there is a public duty or a private service upon which the public depends.  The scope of this second category varies in each state, but examples can be utility services, transportation, medical and legal. 

No court has yet taken up the question of whether liability waivers that protect against liability arising out of the alleged infection of COVID-19 is enforceable or triggers such public policy protections.

Considerations When Using Waivers to Protect From COVID-19 Liability

• Make it Stand Out.  If you are going to use a liability waiver it must be clear that the signor is waiving certain rights.  Thus, if the waiver is part of another document you should use bold typeface and larger print.  If the document is long and the waiver it at the end, you should advise at the front of the document that there is a liability waiver included.  Be sure that the language is easy to understand and that the provision clearly states what type of claims or damages are being waived

• Be careful about statements regarding steps taken to reduce exposure to COVID-19.  As we advised in the prior alert, do not overstate the steps that you are taking to limit the risk of COVID-19 exposure.  There is no requirement in the law that requires a waiver to contain a statement about specific steps that a business is taking in order to mitigate risks associated with COVID-19.  Indeed, one state (Alaska) will not recognize a liability waiver if the agreement represents or insinuates standards of safety or maintenance.

• Provide Consideration.  Courts require that both parties to a contract give up something of value in order to create a binding agreement.  The ability to use your services can often constitute valid consideration.  Thus, in many states valid consideration can be allowing someone to enter your business and use the services you provide.  

• Waivers do not prevent lawsuits.  A valid waiver cannot prevent you from being sued.  Rather, they are defenses to the lawsuit that can defeat the claims.  The existence of a valid waiver can also be a deterrent to anyone who is considering filing a lawsuit. 

• A waiver may not apply to minors.  The majority of states have held that pre-injury waivers signed by parents and purporting to waive potential personal injury claims of their minor children violate public policy and are unenforceable.  However, some states (Colorado, North Carolina, and Florida) do allow parents to execute waivers on behalf of minor children.

• Posting is ineffective.  To be enforceable, a waiver generally needs to be provided to, and signed by the other party.  Thus, posting a waiver in your business, without more, will probaby not be effective.

• Signing at the door.  For many businesses, the only option for using liability waivers would be to have visitors sign at the door.  Obviously, this is not a typical procedure.  It is untested in the courts, will be unfamiliar to your customers, and there are significant business considerations that need to be evaluated.  Also, during times when the number of people who can enter a business are restricted, this procedure might be feasible, but it could become unmanageable as those restrictions are eased.  While there is no way to predict how courts will react to this type of procedure, it is likely that arguments related to duress and the lack of time to consider will be raised.  On the other hand, liability waivers have long been used in the event and hospitality areas and anyone who has been rafting, had a massage, or entered a haunted house knows that we are frequently asked to sign liability waivers without being given much time to consider the impact of that agreement. 

• Be reasonable about the scope.  Being overly broad with a liability waiver can lead to a finding that it is unenforceable.  For example, do not try to obtain a waiver of liability for intentional conduct.