Release and assumption of risk agreements are now commonplace in the recreational community. Insurance companies require them and most of the jurisdictions enforce them. But consider the following scenario: You receive notice of a lawsuit brought by a hiker who was injured while participating in a store-sponsored nature hike. Initially, you are not worried about the case because you had the foresight to require the hiker to sign the release and assumption of the risk agreement.
It is not until you really study the hiker's complaint that you discover that he is suing you for negligence and strict products liability. He claims that you rented him a defectively designed backpack, and you did not warn him of over-packing dangers. The over-packing caused the backpack to be dangerously unstable, causing him to take a 40-foot header off the side of a mountain. In addition, he claims that your modification of the backpack (placing your shop logo on the flap) contributed to the cause of the accident.
Suddenly, you are not so sure that the release and assumption of the risk agreement is going to get you out of this litigation. The complaint says you are strictly liable. You know that the release is enforceable against a claim for negligence, but is it good against a strict products liability claim? As any astute lawyer will tell you, "it depends."
Products Liability
The term "products liability" does not refer to a specific tort. Instead, it encompasses several distinct causes of action. The most common categories are: (1) negligent products liability; (2) breach of warranty; and (3) strict products liability.
Negligent Products Liability: Under a negligent products liability claim, the plaintiff will assert a liability theory in at least one of the following three areas: (1) the manufacturer made a mistake with a specific product; (2) the manufacturer defectively designed the product; and/or (3) the manufacturer failed to warn of a danger or gave an inadequate instruction.
Breach of Warranty: If a product fails to meet standards imposed by an implied warranty, it breaches the warranty, and the defendant will be liable. The Uniform Commercial Code defines the implied warranties. See U.C.C. 2-314; U.C.C. 2-315.
Strict Products Liability: Strict liability differs from negligence because the plaintiff does not have to prove that the manufacturer or supplier of the product was negligent. Instead, the focus is on the product itself. If the product is defective, then the manufacturer or supplier may be strictly liable in tort.
The majority of jurisdictions follow the doctrine of strict products liability as it is explained in Torts Restatement Second § 402A. Under this view, the manufacturer or supplier of goods has a duty to provide safe products. If the product is unreasonably dangerous and defective, and the product reaches the consumer without substantial change, the manufacturer or the supplier is strictly liable. A minority of jurisdictions delete the "unreasonably dangerous" requirement. Cronin vs. J.B.E. Olson Corp. (1972) 8 Cal. 3d 121, 104 Cal. Rptr. 433, 501 P.2d 1153.
With any product liability claim, anyone who is in the distribution chain can be liable. If the retailer knew of a defect and sold the product anyway, it can serve to relieve the manufacturer of liability. Generally, the wholesaler is liable only if his conduct exceeds foreseeable negligence. The courts have uniformly held that a lessor of a product is subject to a product liability claim. Ghionis vs. Deer Valley Resort, Ltd. (1993) 839 F. Supp. 789.
Potential product liability claims can arise in many situations, such as selling, renting, servicing, or maintaining recreational equipment. This includes selection of a product for a customer, assembling a product, installing it, maintaining it and/or adjusting it.
In other words, if you touch the product, you may be in the distribution chain and subject to a products liability claim. However, where only a service is supplied, the supplier is generally not viewed to be in the distribution chain. For example, in a case where a defectively designed raft injured a participant in a whitewater rafting trip, the commercial operator and sponsor of the trip were not strictly liable. The court concluded that although the commercial operator and sponsor provided the allegedly defective raft for plaintiff's use, they predominately provided a service, and therefore are not liable for any defect in the recreational raft. Ferrari vs. Grand Canyon Dories (1995) 32 Cal. App. 4th 248, 38 Cal. Rptr. 2d 65.
Releases and Product Liability Claims
The jurisdictions are split as to whether a release is enforceable against a strict products liability claim. If the release is enforceable against a negligence claim, most courts uphold a release for a negligent product liability or breach of warranty claim.
The courts that deny the enforceability of a release against a strict liability do so on public policy grounds: "The doctrine of strict liability is based not only on the public policy of discouraging the marketing and distribution of defective products, but also on the reasoning that a manufacturer is in; a far better position then individual consumers to ensure against the risk of injury and to distribute costs among consumers." Wheelock vs. Sport Kites, Inc. (1993) 839 Fed. Supp. 730 (Hawaii). Therefore, the courts reason that barring a plaintiff's strict product liability claim is "at odds" with the reason for the doctrine. As such, it is void as against public policy.
The majority of the cases decided on this issue involve skiers who injured themselves while using rental equipment. The predominant complaint is that the bindings on the skis either prematurely released, or did not release at all. In California, a court upheld an exculpatory clause with respect to a negligence and breach of contract claim against the renting ski shop. However, the court refused to enforce the exculpatory clause in favor of the ski shop for a strict liability claim: "As a matter of public policy, product suppliers cannot insulate themselves from strict liability in tort for injuries caused by defects in products they place on the market by obtaining a consumer signature on an express assumption of risk." Westlye vs. Looks Sports, Inc. (1993) 17 Cal. App. 4th 1715, 1747, 22 Cal. Rptr. 2d 781; See also Olsen vs. Breeze, Inc. (1996) 48 Cal. App. 4th 608, 55 Cal. Rptr. 2d 818; Weiner vs. Mt. Airy Lodge, Inc. (1989) 719 F. Supp. 342 (Pennsylvania). The distributors of the ski rental equipment were not specifically named in the release, and the court would not construe the release to be broad enough to include them.
On the other hand, there are some courts who have enforced exculpatory clauses for a strict liability claim. For example:
In Pennsylvania, a plaintiff rented ski equipment and was injured when the bindings on the skis failed to release. He executed a "rental agreement and receipt" which contained an exculpatory clause releasing the rental shop from "any liability" for damages and injury from use of the equipment. Zimmer vs. Mitchell and Neff (1978) 253 Pa. Super. 474, 385 A. 2d 437; affirmed at 490 Pa. 428, 416 A. 2d 1010. The court upheld the exculpatory clause as being valid against all causes of action including the products liability claim.
Similarly, a Colorado court upheld a release executed by the plaintiff when she rented ski equipment from the ski school rental shop. She brought a claim for strict products liability against the manufacturer of the ski bindings. Bauer vs. Aspen Highlands Skiing Corp. (1992) 788 Fed. Supp. 472. (Colorado). The court meticulously examined the exculpatory agreement and determined that it was enforceable in favor of all defendants, including the strict products liability claim.
In Wisconsin, the plaintiff was working as a crew member at a race track. She was injured when a race car driver lost control of his car. Plaintiff brought a strict products liability action against the race car manufacturer and distributor. Kellar vs. Lloyd (1993) 180 Wis. 2d 162, 509 N.W. 2d 87; review dismissed at 513 N.W. 2d 408.
The Wisconsin court first noted that generally "public policy prohibits enforcement of a term of an exculpatory contract which exempts from liability a seller of a product." Supra at 181. However, the court further analyzed the release under the circumstances of the case. The court determined whether the terms of the release were fairly bargained for and whether the terms were inconsistent with public policy. The circumstances under which the plaintiff executed the release was closely examined and the court considered that plaintiff had signed at least 33 releases prior to the one at issue. The court then held that the hazards of racing were consciously borne by the plaintiff in exchange for a benefit. Even though the race car defendants were not specifically named in the exculpatory contract, the court determined that it was a general release to all defendants and fairly bargained for. The strict liability claim against the race car manufacturer and distributor was dismissed.
An Illinois court upheld an exculpatory clause in a strict products liability situation because the defendant was a "non-manufacturing party." Garrison vs. Combines Fitness Centre, Ltd. (1990) 201 Ill. App. 3d 581, 559 N.E. 2d 187. The court did not impose strict liability on a health club for purchasing and making available an allegedly defective piece of equipment.
Ways to Protect Yourself
Whether or not a release for strict products liability is enforceable "depends" on the particular choice of law applied to the case. There are some general ways in which you can increase the chances that a release for a product liability claim will be upheld:
- Circumstances: Ensure that the participant has an adequate opportunity to read, review, and reflect on the release itself. Some courts hold that if a release is signed just prior to an event, with pressure on the participant to get the release signed, it is invalid. Barbar vs. Eastern Karting Co. (1996) 108 Md. App. 659, 673 A. 2d, cert. denied. 343 Md. 334, 681 A. 2d 69.
- Identify all potential defendants (to the extent possible) in your releases. This includes, instructors, guides, promoters, sponsors, participants, associations, organizations, owners, distributors, manufacturers, officials, crews, rescue personnel, etc.
- Make sure that the pertinent release language is prominent on the form.
- Make the release as short as possible, but still convey all the information.
- Avoid roster-type releases.
- The language of the release should be clear and unambiguous, and should specifically identify a products liability claim in addition to negligence.
- The release should have a severability clause. In the event that you are sued in a jurisdiction where a pre-injury release for strict products liability is against public policy, the risk that the entire release will be stricken is low.
Conclusion
The release should be tailored to fit the circumstances of the particular recreational activity. A lawyer who is familiar with release and assumption of the risk agreements, and practices in your particular jurisdiction, should review your release periodically to ensure that it comports with recent case holdings.
Overall, no clear trend has emerged from the courts that have addressed the issue of whether a release will bar a strict products liability claim. The outcome depends primarily on the view of the courts in your specific jurisdiction. However, a prudent risk manager can enhance the chances of enforceability of the release by implementing the suggestions outlined in this article.
*Article courtesy of Laura L. Horton of Hewitt & Prout.