Tennessee Supreme Court Establishes New Standards for Waiver Enforcement

By Doyice Cotten

Courts in Tennessee have long held that waivers of liability for negligence are enforceable; in fact, waivers were not disfavored and the bar for enforcement was fairly low. Things may be changing because the Tennessee Supreme Court, in a non-sport case (Copeland v. HealthSouth/Methodist Rehab. Hosp., 2018), reiterated that the public policy in Tennessee has historically favored freedom of contract.  Nevertheless, the court made it emphatically clear that “not all exculpatory agreements should be enforceable,” and established new criteria for enforcement that are now in effect.

The Copeland court held that

… the enforceability of an exculpatory agreement should be determined by considering the totality of the circumstances and weighing these non-exclusive factors: (1) relative bargaining power of the parties; (2) clarity of the exculpatory language, which should be clear, unambiguous, and unmistakable about what the party who signs the agreement is giving up; and (3) public policy and public interest implications.

The court made clear that

  • The totality of the facts and circumstances of each case will dictate the applicability of and the weight to be given to each of these factors.
  • The factors do not have to be weighed equally in any given case – but should be determined by the facts and circumstances surrounding the formation of the agreement.
  • Further, the court made it clear that these criteria apply to all waivers or exculpatory agreements – not just to exculpatory agreements used for “professional services.”

The court then addressed each of the three factors beginning with relative bargaining power. It noted that there is no precise rule by which to determine whether a difference in bargaining power is sufficient to invalidate a waiver. It explained, however, that the two crucial criteria are 1) how important the service at issue is for the physical/economic well-being of the signing party, and 2) the amount of free choice that the signing party has in seeking alternate services.

As to clarity of language, the intent of the agreement to relieve the provider of liability must be clear and unequivocal; in fact, the court stipulated that the wording must be “so clear and understandable that an ordinary and knowledgeable person will know what he or she is contracting away.” Further, the court clarified that the language must 1) alert the party agreeing to the waiver that the provision concerns a substantial right, and 2) not be so broad as to release the provider from liability “for any injury for any reason.” The court cited several cases in which the language “from any and all liability . . . relating to participation in these events” was held to be overly broad. Finally, the court added that ambiguous language must be construed against the drafting party.

The Copeland court noted that the third factor, public policy and the public interest, is the most difficult to articulate. The court quoted the Wisconsin Supreme Court definition of public policy, “that principle of law under which freedom of contract or private dealings is restricted by law for the good of the community” (Atkins v. Swimwest Family Fitness, Ctr., 2005). The Copeland court explained that “a private contract violates public policy if it conflicts with the constitution, statutes, or judicial decisions of this state or tends to be harmful to the public good, public interest, or public welfare.”  It added, however, that public policy is also determined by societal expectations, thus public policy is flexible and may change over time.

Whether a contract is of public interest depends on the totality of the circumstances in light of current societal expectations. Two factors in determining if a waiver is of public interest are 1) whether the provider has a public service obligation or it is an essential service (e.g., public utility, common carrier, innkeeper, hospital) and 2) whether the transaction is related to the public good or affects a relatively small number of persons. Note: When considering public policy or public interest, one should keep in mind that recreational activities generally do not affect the public interest or raise public policy concerns.

Summary

It appears that Tennessee courts will be examining waivers of liability more closely than in the past. This is not bad. However, the court cited cases from both Connecticut and Wisconsin in the Copeland case. Courts in those states are very reluctant to enforce waivers; in fact, very few are enforced. It would be unfortunate if Tennessee follows the paths of those two states. We really will not know until some sport, recreation, or fitness waivers appear before the court.

Photo Credit: Thanks to  Jerry “Woody”  via Flickr.