Limiting Business Liability - Release Forms

Release forms may lower risk

Yellow insurance policy documents with fountain pen
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If your business conducts a potentially dangerous activity or interacts with the public in a significant way, then your business insurer may insist upon your business using release of liability forms or liability waivers (the terms are interchangeable and will be used that way for this article). The customer, client or participant signs the form and "waives" their rights to make a liability claim if they are injured.

The idea is to limit the number of negligence cases filed by patrons against your business. Even if your insurer does not insist on such liability waivers or releases, it is a good practice and should be a part of your risk management program. This article will offer some advice on creating and using release forms in your business and discuss whether such forms are enforceable.

Release Form Myths

There are many myths about liability waivers. It is important for the business owner to understand and reject these myths.

"By having a patron sign a waiver, they can't sue me." Wrong. A release or waiver does nothing more than shift some legal and technical presumptions from you to the injured party to prove. In some cases, with adequate supporting state law, a waiver may support a motion to dismiss the case, but it does not eliminate the right to sue.

"I don't need to make a claim. The customer signed a release. I'll send it to the customer's lawyer and they won't sue." Wrong.

Having a release or waiver of liability in the file does not mean you do not need to report the claim. Report the claim to the insurer and forward the waiver form. The form does not translate the claim into one you can handle.

"I don't need insurance if I use release forms." Wrong. Your business must be insured for activities undertaken by the public at your facility and the use of releases is often a requirement of the business insurance policy.

How to Create Enforceable Release and Waiver Forms

The University of Vermont has a strong horse and stable owner program. They track many court cases dealing with the enforceability of liability waivers. I encourage business owners to briefly scan that page. Why? Because the single top reason why courts refuse to enforce liability releases and waivers is because the release form is poorly drafted and fails to comply with state law. For a release to be valid, it must be drafted clearly, without ambiguity, and in compliance with the law of the state where the activity will take place.

To create enforceable releases, start with an insurer that understands your business. Ask the insurer, and your insurance professional, if they have form liability waivers they can share with you. You can ask others in your business or, if you belong to a trade organization, you can ask other professionals.

But, after finding a good stock release form suggested by a reliable source, take the proposed release to an attorney. Most bar associations have referral programs and can direct you to a good attorney to draft a state specific release. Most attorneys do not charge much to draft such documents. Once drafted, have it reviewed once every year or more if significant legal changes occur.

Do not use form book releases or Internet releases. I can write a separate article on why you should have a lawyer draft documents instead of relying on how-to books and Internet sources. Let me summarize:

  • Release language is state specific. How-to books and Internet sources typically do not properly address state law.
  • The cost of having a good release drafted by an attorney is minuscule compared to the cost of a potential liability claim.
  • You have no recourse against Internet sources. Lawyers are bound by their state license, ethical requirements, and their own malpractice insurance to provide competent representation.

Enforceability of Releases

Liability releases are governed by state law. There are a few principles that are generally observed by each state.

  1. Minors cannot release liability. Depending upon the contract age of majority in your state, releases cannot be enforced against those under the legal contract age. Parents and guardians may release liability on behalf of the minor - other adults may not.
  1. Patrons can release ordinary negligence claims. Patrons can still sue for gross negligence and intentional torts.
  2. Written release language going beyond what state law allows in written releases is unenforceable - even if signed by the patron. In some cases, it can void the entire release.
  3. All blank lines must be filled in. All information must be accurate. The release must be read, understood, and knowingly signed by the patron.
  4. The patron must be able to understand the release. If applicable, have large print releases available, braille releases, foreign language releases (especially, Spanish), for your patrons.

Written releases of liability are generally enforceable and can serve as a powerful defense to personal injury claims.

Good Business Practices to Enforce Releases

Good business practices must be followed in order to have enforceable releases. Employees must be trained to politely force patrons to read releases and take the time to explain the release. Employees must complete every blank line on the release and insist on all information - even at the risk of losing a sale.

Finally, understand that properly signed written releases do not give the business the right to disregard patron safety. Rather, a well-drafted, state law-compliant, signed release is a tool in the business insurance plan that can reduce risk.