Bike Shop Risk Management Concerns -Part 6

Part 6 of a 6 Part Series

This series is specifically aimed at the needs of Bike Shops, however much of it holds true for many other sport-related businesses. The first five articles are written by Scott Chapin who has 15 years of experience in insurance and specializes in insurance for Bike Shops.  He is with RJF,
a Marsh & McLennan Agency LLC company located in Minneapolis. This final article is written by Alexander Pendleton, an attorney with a special interest in liability waivers (see the end of the article for more information).

Waiver-of-Liability Forms: Do Courts Enforce Them?[1]

By Alexander “Sandie” Pendleton
Kohner, Mann & Kailas, S.C.

Most bike shop owners know that there are three components to a basic risk-management plan:

  1. Good liability insurance coverage;
  2. Good operational policies/procedures that reduce the risk of injuries; and
  3. Good waiver-of-liability forms.

To illustrate the above, let’s take a simple example where the owners of a bike shop are discussing hosting a regular “Tuesday Night Ride” from the shop. As they make their decisions, the owners discuss the income-statement implications of hosting a regular Tuesday Night Ride, and ask questions like this:

  1. What costs will likely be associated with a regular Ride?
  2. If the Ride is likely to increase shop traffic and sales, will the likely profits from those increased sales, be greater than the likely costs associated with the Ride?

But in conjunction with the above income-statement questions, the owners should also be discussing risk-management issues, having a dialogue that would go something like this:

  1. On insurance issues: “If we do such rides, before we start we are going to have something in writing from our insurer confirming that we have liability coverage for the normal risks/claims associated with such rides, and we are going to know whether our hosting such a ride is going to increase our insurance premium costs.”
  2. On operational issues: “If we do such rides, before we start we are going to have in place written rules and policies for riders and staff that reduce the likelihood of accidents and injuries, e.g., everyone on the ride must wear a helmet, and everyone on the ride must . . . .”
  3. On waiver issues: “If we do such rides, before we start we are going to have a good waiver-of-liability form, one that’s actually likely to be enforced by a court if someone gets injured and we later get sued, and we’re going to have a clear idea of what that is going to cost us to obtain.”

The costs associated with each of the above three items, would need to be factored into the business calculations relating to whether hosting the Ride would be a sound business decision for the shop. We focus in this article primarily on the third risk-management component above, good waiver agreements.

First, do courts enforce waiver agreements, or are waivers generally worthless? The most recent edition of the Marquette Sports Law Review  came out this month (June 2012), and it includes the National Sports Law Institute’s annual compendium of recreation-related lawsuits. Included in the compendium are summaries of six decisions released by U.S. courts in the last year in which courts considered whether a waiver-of-liability agreement should or should not be enforced.

Overall, waivers fared well in these decisions. Out of the six decisions, the courts held the waiver enforceable in five (i.e., the businesses in those cases won). Those five cases included the following:

  • A Wisconsin case in which two spectators at an auto race watching from the pit area were seriously injured when a race car went over a barricade and struck them.
  • An Illinois case involving a similar accident at a race car event, which resulted in three “corner workers” being hit by a race car.
  • A Kentucky case in which a participant at a paintball center sustained a permanent eye injury.
  • A California case in which a health club patron sustained head, neck and back injuries when a pulley-cable weight machine broke.
  • A California case in which a participant in a youth soccer tournament was injured when she fell and her knee landed on a plastic sprinkler cover.

In each of the above cases, the trial court granted summary judgment to the defendants (meaning that the plaintiff’s claims were “thrown out by the judge” on motions even before the case got to trial). So in the above cases, obtaining and using well-drafted waivers proved to be very valuable to the business or organization that used them.

From an insurance and claims-costs standpoint, it should also be noted that in four of the five above cases, there also was an appeal. That means the business (and, assuming the business had insurance, the business’ insurer) had to incur costs associated with (1) reviewing the injured person’s claim, (2) the proceedings at the trial court level (depositions, written discovery, motions, etc.), and (3) the proceedings at the appellate level (research, briefing, oral argument, etc.). In most American cases, even if a defendant wins, the defendant does not get to recover from the losing plaintiff the expenses the defendant incurred in fending off the claim. (An exception to that rule is when a court decides that the plaintiff’s claim was “frivolous” — but that is normally a very difficult standard for a winning defendant to prove.)

The one reported decision in the recent annual survey in which a court held a waiver unenforceable does not have wide application because the accident at issue happened onboard a cruise ship. This Florida case arose out of an accident that occurred when a passenger was trying to learn how to use the cruise ship’s surfing simulator. The passenger alleged that she had been told by a crew member to stand on a body board, which was not designed by the manufacturer to be stood upon, and that as a result she sustained a broken ankle. The trial court granted summary judgment in favor of the cruise line, based on the waiver form the passenger signed when she purchased her cruise tickets. On appeal, the court reversed the decision, holding that federal cruise ship law precludes cruise ship operators limiting their liability to passengers via contract (such as a waiver-of-liability agreement).

In contrast, there is no comparable federal law that precludes bike shops from entering into waiver-of-liability agreements with persons who participate in bike shop organized rides or races, or who take bikes for a test ride. However, it is important to note that, as to state law, courts in a very few states have held that no business may use a waiver form to limit its liability; also, there are a growing number of states (as of the date of this article, approximately 17), that have held that no business may use a waiver form to limit its liability if the participant is a minor. Even in states that void waiver agreements, other legal strategies (such as the use of assumption of risk agreements, or indemnification agreements), may be useful to protect a business and its owners.

It should be remembered that each of the above six decisions was a written decision. The vast majority of personal injury claims are resolved before a lawsuit is commenced, and the vast majority of personal injury lawsuits commenced do not result in written decisions. So, it would be a mistake to conclude from the fact that there were only six decisions mentioned in the National Sports Law Institute’s annual compendium that such a low number of decisions somehow indicates that the number of claims brought by persons injured in a recreational context is small or declining.

The important “take away” from each of the five above waiver-enforced cases is that in each case the businesses had taken the trouble to obtain relatively well-drafted waivers (that did not contain any of the fatal errors that are often included in waiver forms), and each of the waivers specifically (and clearly) addressed the type of risk that resulted in the plaintiffs’ injuries. Doing such sounds easy, but in practice it is amazing how often business and groups use waivers that fail to do so.

So, overall, 2011 was a good year for well-drafted waivers, and the business owners who used them (that is, unless you own a cruise ship line). If you don’t own a cruise ship line, you may want to take the time now, while you’re focused on the issue, to get your waiver forms reviewed, renewed and/or re-engineered. Or, if you currently are not using any waiver forms or agreements, now is the time to investigate the enforceability of these types of agreements in your state, and the costs associated with obtaining good waivers (i.e., ones tailored to your shop’s unique setting, risks and activities). Doing one of the above should help to maximize your shop’s chances of convincing a court, if you ever need to, that your waiver should be enforced. Investing a small amount of your resources now in this important element of risk management, could save you and your business a tremendous amount of worry, money and business disruption later.


Alexander “Sandie” Pendleton is an attorney and business counselor with the law firm of Kohner, Mann & Kailas, S.C. An avid cyclist, and a leader of his local bike advocacy and promotion group, he has over twenty years of experience counseling sports-related businesses, recreational-product manufacturers and other recreational-opportunity providers. His firm’s recreation-law related website is at, and he can be reached at [email protected] or 414.962.5110. (The above is not intended as legal advice; consult with your lawyer or a lawyer experienced in this area of the law if you have a specific question as to waivers and/or recreational legal liability risk management). © Kohner, Mann & Kailas, S.C. 06/2012.   



[1] This article originally appeared on Scott’s website” href=””>

Photo Credit: Richard Masoner / Cyclelicious