Waivers, Hold Harmless Agreements and Certificates of Insurance

1. Waivers, Hold Harmless Agreements and Certificates of Insurance Are We Giving Away The Store?

2. What Is a Waiver? Legally defined, it is the intentional or voluntary relinquishment of a known right

3. Or an Exculpatory Clause? May also be referred to as an exculpatory clause or agreement. The term �exculpatory clause� is more specific. It means a contract clause which releases one of the parties from liability for its wrongful acts. For your purposes, the precise legal term is not important. What we�re discussing is an agreement through which you ask a party not to sue you for harm that may occur to him/her based on your negligence

4. The Atkins Case 2005 Wisconsin Supreme Court case which provides guidance on how waivers will be viewed by the courts Common scenario in which private gym patron was asked to sign a waiver, which was printed on a 5x5 card and provided in its entirety:

5. Waiver at issue WAIVER RELEASE STATEMENT I AGREE TO ASSUME ALL LIABILITY FOR MYSELF WITHOUT REGARD TO FAULT, WHILE AT SWIMWEST FAMILY FITNESS CENTER. I FURTHER AGREE TO HOLD HARMLESS SWIMWEST FITNESS CENTER, OR ANY OF ITS EMPLOYEES FOR ANY CONDITIONS OR INJURY THAT MAY RESULT TO MYSELF WHILE AT THE SWIMWEST FITNESS CENTER. I HAVE READ THE FOREGOING AND UNDERSTAND ITS CONTENTS.

6. Atkins Case, cont. Wilson, the customer, was slow to fill out the card, and it took her a long time to sign the card. She eventually drowned in one of Swimwest�s pools. Her son�s representative sued.

7. Atkins Case, cont. Relying on the waiver, the trial court dismissed the case. The court of appeals certified the issue to the Wisconsin Supreme Court because Wisconsin courts had not yet articulated a clear test on the enforceability of such releases. The Supreme Court ultimately found that the waiver was invalid.

8. Atkins� Court Reasoning The Court started by finding that Wisconsin case law does not favor exculpatory agreements, and they will be construed against the party seeking to enforce them. The Court invalidated the Swimwest agreement on three grounds: It was overly broad and all-inclusive. The form served two purposes: registration and waiver of liability, and therefore, its significance was unclear There were no facts to suggest that Wilson had an opportunity to bargain over it.

9. The Problem with Overinclusion The Swimwest waiver included reckless and intentional conduct, which can never be waived. Its breadth made it hard to anticipate the actual risks. Some on the court questioned whether Wilson could reasonably anticipate drowning as a risk (others found it an obvious risk).

10. The Problem with a Dual-Purpose Form The Court found that Wilson lacked notice of what she was actually signing based on a number of factors: The waiver was not conspicuous. The form did not identify and distinguish clearly between the different contractual arrangements (agreeing to pay for services, and agreeing to waive liability).

11. The Problem with No Bargaining The quid pro quo arrangement was significant: either sign the form or don�t participate. This is despite the fact that Wilson was told the form included a waiver, took time to read it, and had the opportunity to ask questions. There was no true opportunity to change the terms of the waiver.

12. What Agreements Are Enforceable? The Court said that it will not hold all such agreements invalid. Thus, it should be possible to create an enforceable agreement. But, how??

13. How to Draft an Enforceable Waiver 1. What the agreement covers (and doesn�t): Do not include reckless or intentional acts Be somewhat specific about actual risk: death? Paralysis? Broken bones? Electrocution? Drowning? Distinct forms (or at least sections): The fact that it is a waiver should be conspicuous Also consider font size, different ink, and distinct signature lines if using one form for multiple purposes

14. How to Draft an Enforceable Waiver, cont. Provide an opportunity to bargain: Perhaps tell customer that you would have charged more but for waiver (by signing this, you acknowledge that this service/activity would have cost more had this waiver not been present, and you do not wish to pay a higher cost). Provide contact information for questions or to discuss the waiver. Provide a line which says that the person waives the right s/he has to bargain for different waiver terms.

16. Hold Harmless Agreements What is a hold harmless clause? The assumption of liability, by contract, of another�s liability Terms of art: indemnitor, indemnitee

17. Why do contracting parties enter into them? Unequal bargaining power Indifference or ignorance

18. Are hold harmless agreements legal? Wisconsin courts require clear and express language, and construe the terms of the contract strictly. Spivey v. Great Atlantic & Pacific Tea Co., 79 Wis. 2d 58 (1977): indemnitor�s agreement to �indemnify and save [] harmless from any loss or liability arising in any manner out of the presence of our representatives on any part of the premises of [indemnitee]� did not hold the indemnitee harmless from a harm caused by its own negligence.

19. Limits on the indemnification the state can undertake When the state is the indemnitor, only so much enforceable liability that a state actor can assume. The State could hold another party harmless, but could not agree to pay damages beyond those authorized under Wis. Stat. s. 775.01. Under Koshick v. State, 2005 WI App 232, 287 Wis. 2d 608, par. 10-12, the State can be sued under contract only for the reasonable value of goods and materials. Action does not lie for unascertained damages, or where the sum must be ascertained by resorting to extraneous evidence.

20. Types of hold-harmless agreements: scope Limited�holds the indemnitee harmless only for indemnitor�s own operation Intermediate�holds the indemnitee harmless for acts other than the indemnitee�s sole negligence Broad�holds the indemnitee harmless for all acts

21. Types of Hold Harmless Agreements: Types of Damages Acts of god Negligence Amounts covered by property insurance

22. How do you deal with a proposed hold harmless clause? WHEN: BEFORE YOU SIGN THE CONTRACT.

23. Evaluating hold harmless clauses�. Undertake risk consciously: have risk management, or some other identified individual, review the proposed language

24. Evaluating hold harmless clauses. . Evaluate the potential costs of your agency�s assumption of risk on an �after the contract� basis. (Consider whether the agency�s signing off on the risk is the same agency that will bear the costs!)

25. Evaluating hold harmless clauses. . Even if you are in a position of weaker bargaining power, don�t view clause on a take-it-or-leave-it basis. Consider modifications to the contract that would eliminate, or at least modify, the scope of the risk undertaken.

26. Certificates of Insurance In cases where a contractor has retained risk, or undertaken additional risk, make sure that it has procured insurance Contractor unlikely to have financial means to bear costs of a high loss Consider what coverage limit is sensible Follow through: get certificate of insurance to make sure that policy is in place, and covers the losses you expect

27. Certificate of Insurance Program