Waivers of Liability in the COVID-19 Era: Proactive Steps Businesses Should Consider to Protect Against Possible Future Liability

Butler Snow LLP

Butler Snow LLP

The current coronavirus (also known as “COVID-19”) pandemic has changed how industries across the United States and the world are conducting business. It has cast uncertainty and apprehension into even the most routine commercial interactions. Despite these circumstances, many industries continue to provide their customers with essential services necessary for continued economic stability and public safety. On one hand, continuing operations means businesses are supplying integral services and helping prop up the American economy during a time of economic downturn. On the other hand, these businesses are operating in unchartered territory, which carries costs and risks of its own.

In the ever-changing landscape of this pandemic, businesses continuing operations should be proactive in trying to limit these risks. They should monitor and comply with government rules and guidelines. These businesses—particularly those in the services industries whose very nature requires physical interaction with their customers—should also consider taking steps to protect against possible future liability for coronavirus exposure claims (i.e., claims that a customer contracted coronavirus while on their premises or while an employee performed services at a customer’s home or business and—inadvertently—exposed customers). Even in uncertain times like these, sound legal principles can provide guidance to businesses and industries committed to continuing essential operations.

A liability waiver is a simple, familiar, and cost-effective first step that businesses can take to protect against potential liability for exposure claims. Most individuals are familiar with liability waivers, and you probably signed one prior to opening a gym membership or going skiing, sending your kids on a school field-trip, or after calling the plumber to fix a broken pipe at home. A waiver is simply a voluntary relinquishment or abandonment of a legal right. Waiver, Black’s Law Dictionary (11th ed. 2019). A liability waiver—sometimes also called an exculpatory agreement—is a written contract between two or more parties in which one party (generally the customer) acknowledges the risks of participating in an activity or of accepting the services of another party (generally the provider). Most importantly, the customer also agrees to prospectively waive the right to sue the provider for injuries or damages arising out of the activity or services. The waiver may be as simple as a clause in a services contract or a separate form of its own, and the parties will typically execute it prior to or immediately following performance of the subject services.

Even though liability waivers are routine and well-known, it is unclear whether a COVID-19 waiver relieving a service provider of liability for exposure claims would be enforceable. This is due, in part, to the practical reality that no court in the country has yet analyzed such waiver in this context. But basic legal principles should guide any such analysis, and those seeking to execute liability waivers should consider the following general principles.

In most jurisdictions across the United States, courts will enforce liability waivers that insulate a party from liability arising out of that party’s negligent conduct. For example, courts have enforced waivers for negligence claims arising out of horseback riding and skiing accidents, slip and falls, and even accidental data breaches. Harris v. Walker, 119 Ill. 2d 542 (1988); Raup v. Vail Summit Resorts, Inc., 233 F. Supp. 3d 934 (D. Colo. 2017), aff’d, 734 F. App’x 543 (10th Cir. 2018); Cornell v. Council of Unit Owners Hawaiian Vill. Condominiums, Inc., 983 F. Supp. 640 (D. Md. 1997); Standifer v. Best Buy Stores, L.P., 364 F. Supp. 3d 1286 (N.D. Ala. 2019). Most jurisdictions require that such waivers are clear and unambiguous, and that they be fairly bargained for between the parties. Mero v. City Segway Tours of Washington DC, LLC, 962 F. Supp. 2d 92, 100 (D.D.C. 2013) (“Accordingly, and for all of the reasons stated above, the Court finds that the liability waiver that plaintiff signed was sufficiently clear and unambiguous in expressing the parties’ mutual intent to relieve defendant of liability for the negligence that plaintiff has alleged”); Natchez Reg’l Med. Ctr. v. Quorum Health Res., LLC, 879 F. Supp. 2d 556, 562–63 (S.D. Miss. 2012) (stating that waivers must be “fairly and honestly negotiated and understandingly entered into.”) (internal quotations omitted); Wright v. Sony Pictures Entm’t, Inc., 394 F. Supp. 2d 27, 33 (D.D.C. 2005); Cobb v. Aramark Sports & Entm’t Servs., LLC, 933 F. Supp. 2d 1295, 1298–99 (D. Nev. 2013). Like other contracts, liability waivers are strictly construed against the party that drafted them. Harris v. Walker, 119 Ill. 2d 542, 548 (1988).

It is crucial that waivers are drafted in a manner that guarantees customers will understand the risks associated with the services, as well as the rights they intend to waive. A clear intention to waive specific rights is paramount. Some waivers may already protect against liability for physical injury, illness, or bodily harm, but there is no precedent to definitely conclude that the coronavirus would be covered under those terms. Because courts require waivers to be clear and unambiguous, industries may consider expressly including exposure to the coronavirus as a potential risk.

How courts interpret and apply waivers of liability varies by state. Some states favor enforceability of waivers on the basis of freedom of contract, while others will more strictly scrutinize such waivers. Compare Standifer, 364 F. Supp. 3d at 1295 (“Alabama law recognizes the freedom to contract and upholds clearly manifested limitations in a contract”) (internal quotations omitted), with Natchez Reg’l Med. Ctr., 879 F. Supp. 2d at 562–63 (“Clauses limiting liability are given rigid scrutiny by the courts”) (internal quotations omitted). A majority of states will enforce valid waivers, and only three states—Connecticut, Montana, and Virginia—have categorically refused to enforce liability waivers. Hanks v. Powder Ridge Restaurant Corp., 276 Conn. 314, 326 (2005); Mont. Stat. § 28-2-702; Hiett v. Lake Barcroft Cmty. Ass’n, Inc., 244 Va. 191, 195 (1992).

Despite their perennial use, liability waivers have some limitations. Most jurisdictions will not enforce waivers of liability that purport to prospectively waive liability arising from intentional, reckless, or grossly negligent conduct. See  Mero, 962 F. Supp. 2d at 100 (“Because District of Columbia law prohibits release from liability for grossly negligent, reckless, or intentional acts, the Agreement will not be held to indemnify defendant with respect to such conduct.”); Houston Expl. Co. v. Halliburton Energy Servs., Inc., 269 F.3d 528, 531–32 (5th Cir. 2001); Simmonds Equip., LLC v. GGR Int’l, Inc., 126 F. Supp. 3d 855, 867 (S.D. Tex. 2015). This means a party cannot claim immunity from suit if it engaged intentionally or recklessly in conduct that caused the harm. For example, because fraud is an intentional tort, a waiver would not immunize a party against a claim of fraud. See generally Simmonds Equip., 126 F. Supp. 3d at 867. Similarly, because courts define gross negligence as an extreme deviation from the ordinary standard of care or a conscious disregard for the rights and safety of others, Mero, 962 F. Supp. 2d at 100, a service provider that visited a customer’s home while exhibiting coronavirus symptoms or being aware of a positive diagnosis would not be contractually immune from liability to an exposure claim. This is because exposing a customer to a known risk of contracting coronavirus may be considered reckless or grossly negligent conduct. For more information of what to do if you suspect you or an employee have been exposed to or contracted coronavirus, please visit the Labor and Employment section of our Coronavirus Hub.

A second limitation of liability waivers is that courts will not enforce waivers that are contrary to public policy. In some states, a waiver implicates public policy if it involves a matter of interest to the public, like contracts for employment, public utilities, or common carriers. For example, in Brown v. Soh, the court found that a waiver purporting to release an employer from liability for negligence to its employees violated public policy. Brown v. Soh, 280 Conn. 494, 503 (2006). This was, in part, because workplace safety and the employee-employer relationship are subject to numerous public statutes and regulations, and the employer generally will have superior bargaining power that makes a waiver inherently unfair. Id. at 503–04. Because the novel coronavirus affects the public generally, it is unclear whether liability waivers for exposure claims will be considered contrary to public policy, and therefore void and unenforceable. Our team will continue to monitor the direction of the current pandemic, and the remedial response by various local, state, and federal governments that may affect the enforceability of these waivers.

Even with these limitations, liability waivers provide businesses a significant first step to proactively protect against possible future liability for exposure claims. It is no surprise many in the service industry have started integrating coronavirus waivers into their contracts or have amended existing clauses to specifically include the risk of contracting the virus. We anticipate these waivers will become more popular, and we will continue to monitor courts’ responses to such waivers.

Finally, as part of their continued operations, some industries may move to alternative methods for providing their services. For example, fitness trainers may begin training and supervising their customers remotely. Some sports teams or leagues may also conduct practices remotely and without a coach physically present. These and similar industries, too, should reconsider their existing agreements with their customers and may need to modify existing waivers—or execute new waivers—to account for new risks attendant with the changed activities and delivery of services.

Whether a liability waiver is appropriate will depend on a number of factors, and the complexity and breadth of these waivers will vary by industry and jurisdiction on a case-by-case basis. Members of our Tort, Transportation, and Specialized Litigation Group are prepared to guide and assist you if you believe a waiver is appropriate for your business or industry during this time.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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