From the desk of Jeff Eberhard: Contracts containing release and indemnity provisions can be upheld if they are not unconscionable or offend public policy. While these provisions can be useful, particularly for businesses involving recreational activities, they are not absolutely effective against all types of claims.
Claims Pointer: Insurers should be aware that under Bagley, a release may not be valid against a patron whose injuries are caused by the proprietor’s own negligence, as opposed to injuries inherent to a particular activity. It is also important to note that a business that offers a unique service may not be able to enforce a release because such a situation may create a superior bargaining positon in relation to the patron.
Bagley v. Mount Bachelor, Inc., 356 Or 543 (2014).
On September 29, 2005, Al Bagley (“Bagley”), an experienced snowboarder, purchased a season pass from Mt. Bachelor Ski and Summer Resort (“Mt. Bachelor”) for the 2005-2006 ski season. Bagley signed the standard release agreement, which released and indemnified Mt. Bachelor of all claims except those based on intentional acts. On February 16, 2006, Bagley was snowboarding in Mt. Bachelor’s terrain park when he injured himself while snowboarding over a jump that was built by Mt. Bachelor. Bagley’s injuries resulted in his permanent paralysis. Bagley sued Mt. Bachelor for its negligence related to the jump.
Mt. Bachelor asserted the defense of release, pointing to the signed release form, similar release language on the season pass card, and signs posted at every lift that warn patrons that the resort is released from all liability. Mt. Bachelor moved for summary judgment and the court granted their motion, rejecting Bagley’s arguments—including that the release was procedurally and substantively unconscionable. The Court of Appeals upheld the ruling of the trial court. The Court rejected Bagley’s argument that the release violated public policy, stating that “skiers and snowboarders voluntarily choose to ski and snowboard and ski resorts do not provide essential public services.” The Court rejected Bagley’s unconscionability argument on the same grounds, stressing that skiing is not an essential service and that Bagley was not in an unfair bargaining position when he signed the release.
On appeal to the Oregon Supreme Court, Bagley renewed his public policy and unconscionability arguments. The Court began its analysis by reviewing Oregon’s exculpatory release law. The Court pointed out that several states have abolished exculpatory releases altogether either through statute or common law, but that Oregon common law neither favors nor abolishes anticipatory releases. The Court ultimately reversed the Court of Appeals, finding that the release was unenforceable because it was procedurally unconscionable and substantively unconscionable; a release will fail if it is either and the Supreme Court held that it was both.
In reaching its decision regarding procedural unconscionability, the Court identified several procedural factors necessary to deciding the issue: “whether the release was conspicuous and unambiguous; whether there was a substantial disparity in the parties’ bargaining power; whether the contract was offered on a take-it-or-leave-it basis; and whether the contract involved a consumer transaction.” The Court concluded that while Mt. Bachelor’s release was conspicuous (which weighed in favor of Mt. Bachelor), there was significant disparity in bargaining power, the season pass was offered on a take-it-or-leave-it basis, and that it was a consumer transaction. On the issue of bargaining power, the Court reasoned that Mt. Bachelor had substantial bargaining power because skiers like Bagley had virtually no other option due to the limited number of ski resorts in Oregon. The Court explained that even if Bagley had wanted to ski elsewhere, he would have needed to sign a similar release, so Bagley essentially had no choice.
On the issue of substantive unconscionability, the Court identified the following determinative factors: “whether enforcement of the release would cause a harsh or inequitable result to befall the releasing party; whether the release serves an important public interest or function; and whether the release purported to disclaim liability for more serious misconduct than ordinary negligence.” The Court concluded that enforcement of the release in this case would be inequitable. The court explained that public policy weighed in favor of Bagley despite Oregon statutes that establish the duties of a skier, because the risk involved here, a man-made “jump,” was not an inherent risk of skiing. In other words, Mt. Bachelor’s negligence in this case was related to a condition that it created, as opposed to a natural condition such as rocks and trees.
As to the remaining factors, the court rejected Mt. Bachelor’s arguments that anticipatory releases are only unenforceable when a defendant provides an essential public service, concluding that its business was tied sufficiently to public interests to require them to perform their duties to their invitees. The Court conceded that the release did not preclude a claim based on more than ordinary negligence, but concluded that the other factors weighed in favor of Bagley.
For the above reasons, the Court emphasized in closing that “we do not mean to suggest that a business owner or operator never may enforce an anticipatory release or limitation of negligence liability,” but that each release must be analyzed individually using the factors discussed above.
Case updates are intended to inform our clients and others about legal matters of current interest. They are not intended as legal advice. Readers should not act upon the information contained in this article without seeking professional counsel.