Understanding Waiver of Liability for Services in California
Quick backstory to the inspiration of writing this blog post.…I recently drafted a waiver of liability for a unique and relatively uncommon business, and was amazed during the research process of how many in the same small industry had waivers of liability that were largely ineffective and clearly not written by attorneys.
It was as if the business owner thought, “who needs an attorney or the expense, I’ll just copy one from another business and change the name to my own.” I read terms in some that actually CREATED instead of transferring exposure and liability when little or none existed before without the terms. (I assume) the writer didn’t understand the legal impact of the language used, and it wasn’t any small issue. It was one of the highest and most common risks of the operation.
I couldn’t help but think what a field day the plaintiff attorney would have with the waiver of liability in a court room, along with the fact the operator would never forget the lesson of why copy and paste can be the most expensive option available. Ok, on to the answer and explanation of Waivers of Liability
Chances are, you have signed waivers of liability many times if you’ve been around for a while, however, you may not know how valid they are and what exactly they do.
WHY?
If you’re a service provider in California, it is important to understand the legal implications of a waiver of liability.
Businesses use them primarily in an attempt to reduce their exposure to frivolous lawsuits and “shakedowns” from people who may have questionable claims. Liability waivers are also useful for businesses to establish who is actually bearing the risk of any given activity. For example, a ski hill may want to clarify to its guests that the guests keep the risk of using the facilities.
Absent clarification, people/guests/clients may legitimately and honestly believe that the business they are contracting with (in this case, obviously providing services and access) will pay for any injuries received while on the hill for example.
The reason why this may not be in anyone’s best interest is simply because the cost of general liability (business insurance) would increase dramatically and have an impact on the price charged.
Often needlessly because if a skier has health insurance, that insurance policy is usually going to be in a better position in both cost and logistics to provide insurance coverage for a given person/skier than a general liability policy that may require significant litigation and discovery to determine “what happened” and who, if anyone other than the skier, is responsible.
WHAT?
A waiver of liability is a legal document / instrument that spells out who is bearing the risk of harm if someone is negligent in a transaction. Generally, the waiver will attempt to release a service provider from as much legal liability responsibility as possible for any harm or damage that may occur as a result of the services provided.
A waiver of liability is often used in the context of recreational activities, such as sports, but can also be used for services such as consulting, tutoring, or other services.
Government organizations love to use them because they know they’re at risk of being sued for just about anything and since they’re the government, they generally don’t have the same competitive forces most businesses are faced with in keeping customers happy.in other words, parks and other rec activities have a take it or leave it approach because they can (to be fair, businesses generally have the same, albeit out of necessity).
In California, a waiver of liability must meet certain requirements in order to be legally binding.
The waiver generally must be in writing and must be signed by both the service provider and the customer. The waiver must also clearly state that the customer is aware of the risks associated with the services and is voluntarily assuming and or retaining those risks.
Additionally, the waiver must be written in plain language that is easy to understand. A court isn’t likely to look favorably on a 20 page small print waiver for a relatively small transaction. Even reasonably short waivers that bury key information can be ruled improper.
It is important to note that a waiver of liability does not protect a service provider from all legal responsibility.
For example, in California, as well as most jurisdictions, a waiver of liability does not protect a service provider from liability for gross negligence or intentional misconduct.
It’s also important to note that the terms used in this article encompass both technical definitions and more lay/common use definitions, and are not appropriate to determine an outcome of an action or even used as part of a legal analysis.
Only a well-trained attorney working in liability and/or litigation is going to have the skills required to put all the pieces together. Also, Juries almost always decide if a defendant is liable based on a “negligent” act or a gross negligent act, and often verdicts don’t align well with how a law is written or meant to be interpreted.
That said, gross negligence is really going off the deep end and acting in a way that is so bad it’s often criminal.
For example, using our ski slope as an example, if the operator knew the bolts on the chair lifts were breaking and didn’t care because s/he was thinking “that’s what the safety chain is for” instead of fixing the problem, that might rise to gross negligence compared to knowing it was time to replace/tighten the bolts but delaying the quarterly service a couple of weeks due to being on vacation and without knowing the bolts were breaking (even if they were). As you may notice, a lot of the difference is in the mind of the defendant and their attitude.
Also, generally, a business can’t protect itself using a liability waiver for intentional acts. If an owner of the ski hill decides to loosen up the bolt on a chairlift on purpose (intentionally) hoping the user will fall and break their leg (because they have a love interest in the same person who broke their leg, thinking it will be helpful to gain the attention of the love interest), a waiver of liability, regardless of how worded is likely mostly meaningless in the defense of a civil action against it.
That said, let’s use an employee as the example, now, it’s possible the waiver may be helpful. In part because the employee wasn’t acting on behalf of the employer (employers generally don’t instruct or want employees to cause the clients/customers to sustain injuries), and liability isn’t as clear.
Ultimately, the ski hill may have to pay out, however, it’s likely any means, including the waiver of liability will be beneficial in settling the final resolution recovery amount.
The takeaway is that even in cases when a waiver isn’t a “get out of jail free” card, it can diminish the amount the company (or insurance carrier) ultimately pays as part of the settlement. In other words, properly drafted waivers of liability are generally good and effective to have from the business point of view even when all liability exposure isn’t removed.
As a California business wanting a professionally and well crafted waiver of liability specific to your business, you may spend anywhere from $300 to over $10,000+ depending on the complexity and nature of the business. A more generalized waiver may only be $100-$300 if it’s relatively common and case law is well established with clear direction.
If you’re a California business seeking a custom waiver of liability, give me a call and let’s discuss your objectives and see what we can do together.
Regardless, don’t fall for the trap of copy and paste. Few things in life are more humbling and embarrassing than being in a deposition or witness box while an attorney makes you appear incompetent to run your own business and you’re feeling like the village idiot.
Even if your insurance pays the claim, you can believe the insurance company is likely to require you have your waiver professionally drafted, and increase your insurance rates for a few years if an otherwise questionable claim wouldn’t have gone anywhere but for an ineffective waiver of liability.