As many businesses shift their seasonal focus to summer activities and services, it is helpful to know whether and to what extent the ubiquitous waivers signed by parents on behalf of their minor children, usually as a condition to participation, are enforceable. The Maryland Court of Appeals recently clarified the state of the law in this area.
An exculpatory clause (sometimes referred to as a waiver or release) is a provision in a contract that relieves a party from liability resulting from that party’s negligent act. Under an exculpatory agreement, the parties expressly agree in advance that the (potential) defendant is under no duty of care to the (potential) plaintiff, and therefore no liability will attach to the consequences of conduct that would otherwise be deemed negligent – and compensable – under the law. Courts in Maryland will generally uphold exculpatory clauses, except for those agreements in transactions that affect the public interest. A recent opinion issued by the Maryland Court of Appeals confirmed that exculpatory clauses signed by a parent on behalf of a minor child are likewise enforceable on the same basis as those signed by an adult for himself or herself.
The underlying facts of the case, BJ’s Wholesale Club, Inc. vs. Rosen, are straightforward. The Rosens’ 5-year-old son was playing in the Kids’ Club play area of a BJ’s store in Owings Mills when he fell off the front of a plastic play apparatus (“Harry the Hippo”), from a height of approximately 3 feet, and landed head-first on a concrete floor covered only by a thin layer of carpet. Ms. Rosen, who was shopping elsewhere in the store, was summoned to the play area and asked to retrieve her son, who was crying as a result of the fall. The child suffered a large, acute epidural hematoma and underwent life-saving emergency surgery on his skull at Johns Hopkins Hospital. The Rosens’ lawsuit alleged that BJ’s negligently breached its duty of care to their son because, whereas most of the play area was located atop padded carpeting, the carpet located under Harry the Hippo was adhered only to the concrete floor, with no padding.
Ultimately, the Rosens’ lawsuit failed because of the exculpatory clause in the Kids’ Club agreement they had signed over a year before the accident. The path to this conclusion was not so straightforward, however.
Although the trial court upheld the exculpatory clause and found for BJ’s, the Rosens achieved temporary success on their appeal to the intermediate appellate court, the Maryland Court of Special Appeals (CSA). The CSA reversed the trial court, holding that a parent’s agreement barring the child’s future negligence claims against a commercial enterprise was unenforceable. The CSA was persuaded by similar holdings of other states such as New Jersey and Florida, and invoked Maryland’s “parens patrie” interest in caring for certain people (such as minors) who cannot care for themselves. The CSA also found that commercial enterprises are better able to absorb the costs of injuries than are the injured children or their families, because businesses can spread the costs of insurance among their customers.
BJ’s appealed this decision to the Court of Appeals, which reversed the CSA and reinstated the trial court’s ruling, while providing additional support for its holding. The Court acknowledged that exculpatory clauses were generally accepted except under the following circumstances, deemed contrary to public policy: (1) agreements purporting to excuse liability for intentional misconduct or extreme forms of negligence such as recklessness or gross negligence; (2) agreements between parties of grossly unequal bargaining power; and (3) agreements in transactions affecting the public interest. The various courts in BJ’s vs. Rosen all grappled with the third exception and how to define the “public interest.”
The Court relied on precedent for the ultimate determination of what constitutes the public interest – apart from previously defined public interest transactions such as public service obligations (e.g., public utilities, common carriers, innkeepers, etc.) – lay in considering the “totality of the circumstances” of the case “against the backdrop of current societal expectations.” To discern the “societal expectations” that help define the public interest, the court analyzed numerous statutes with the common theme that parents are empowered to make significant decisions on behalf of their children, such in the areas of the child’s physical and mental health, education and employment. The court also surveyed the case law on the welfare of children, and found no considerable limitations on a parent’s right to contract on behalf of her child. Perhaps most notably, and in contrast to other states that have invalidated exculpatory clauses signed by a parent on behalf of a minor child, the court found that under Maryland law, parents may settle or terminate litigation on behalf of their minor children without court oversight.
This review suggested a societal expectation in Maryland law that a parent’s decision-making – including the decision to prospectively waive a minor child’s negligence claim – is broad, and that the Rosens’ execution of an exculpatory agreement on behalf of their son in order to allow him to use the BJ’s Kids’ Club play area was not a transaction affecting the public interest. Further, the court determined that it should be up to the legislature, not the court, to decide whether an exculpation agreement should be invalidated because a commercial entity may better able to offset the risk of loss than non-commercial entities by purchasing insurance. It also concluded that the CSA’s reliance on the state’s parens patrie interest in this case was an error because it presupposes parents are unable to perform the parenting function.
The proper drafting of an exculpatory clause can reduce a business’s exposure to liability as well as obstacles to obtaining adequate insurance.
For more information please contact Jason Brino at 410-583-2400 or firstname.lastname@example.org.