Calif. Supreme Court: Signed liability waiver may not protect against gross negligence

Is a signed liability waiver useless in protecting a government entity from gross negligence and only good in protecting against ordinary negligence? That is the issue being evaluated by the California Supreme Court.

At issue in City of Santa Barbara v. Superior Court is whether a liability waiver can be effective as to ordinary negligence under Civil Code section 1668, as interpreted by Tunkl v. University of California (1963) 60 Cal.2d 92, but not as to gross negligence.

In the case, a disabled 14-year-old girl drowned in a city-owned swimming pool in Santa Barbara, Calif., while participating in a recreational activities program for developmentally disabled children. Prior to the girl’s participation in the program, her parents signed a waiver and release and express assumption of the risk agreement. By signing the agreement, the parents waived and released all liability related to the program, including potential negligence of the facility and its workers.

Nevertheless, after the girl drowned, the parents filed a lawsuit, alleging that the city of Santa Barbara and its counselor acted negligently.

The trial court ruled that the agreement signed by the parents was valid and enforceable, but concluded that the agreement could not protect the defendants from liability for “gross negligence.” Consequently, the case was allowed to go to trial, where a jury would decide whether the plaintiffs could prove “gross negligence.”

Prior to that ruling, California case law generally held that unless a specific statute applied to a set of circumstances and that statute allowed for a claim of “gross negligence,” then so-called degrees of negligence did not exist. In contrast to the law, the trial court permitted a non-statutory cause of action for “gross negligence” and it found that such liability could not be waived or released. While a release can be effective in defeating ordinary negligence, the factual issue as to whether conduct would arise to the level of gross negligence would be left to a jury.

The defendants appealed, and the Court of Appeal affirmed the ruling, which found that the waiver and release signed by the parents could protect the organizing government entity from ordinary negligence, but not gross negligence.

Following that decision, the defendants petitioned the California Supreme Court for review. The Supreme Court ordered that briefs be filed in Jan. 2007, and the Court heard oral arguments on April 3, 2006, in Los Angeles.

According to legal firm Agajanian, McFall, Weiss, Tetreault & Crist LLP, the court’s ruling could mark a new era in the sports and recreation industries in California, with growing liability exposures, increased litigation and rising insurance costs.

“Summary judgments are obviously very important to defendants in the sports and recreation fields, and their ability to obtain insurance. Even if a case is ultimately won at trial, the case is already lost to a significant degree if the defendant is forced to defend itself at trial due to the immense costs and fees expended, in addition to the potential liability exposures,” said Bill D. Anthony, an associate at the law firm. “All attorneys know that the vast majority of cases in this context do not go to trial. A plaintiff’s attorney knows that his or her chance of obtaining a monetary settlement is greatly increased if he or she can force the case to trial.”

As such, several amicus curiae (friend of the court) briefs were filed for the hearing. Anthony and Paul L. Tetreault of Agajanian, McFall, Weiss, Tetreault and Crist LLP filed briefs on behalf of the California Speedway in Fontana and NASCAR, “both of whom rely heavily upon waiver and release agreements signed by race participants and spectators entering the pit areas,” Anthony explained.

During the hearing, the court’s questioning fluctuated from broad to specific, Anthony said. “At times, the court seemed intent on focusing closely on the release signed by parents of disabled children participating in certain important recreational programs. [At] other times, the court seemed concerned about the bigger picture of recreational activities on the whole and setting a broad rule regarding releases and the potential of gross negligence liability,” he said.

Nevertheless, the court requested additional briefing, asking that the parties address the broader public policy issues and concerns relative to the release signed by the parents.

“By its order, the court seemed to be widening the potential reach of its decision,” Anthony noted. “While the initial grant of review seemed to be concerned primarily with gross negligence,” this new order seems to indicate that the court may be considering the ruling that the document is altogether against public policy, such that it could not protect the city of Santa Barbara from either ordinary negligence or gross negligence.”

Further briefing was scheduled for April 25, 2007, with a decision expected within 60 to 90 days after.

“This could be a pretty big decision,” Anthony noted. Insurance companies look at recreational facilities’ liability waivers when assessing a company’s risk. If a national brokerage insures several recreational programs nationwide, it generally has a set rate for coverage and spreads out its risk. California and Florida are known to have more favorable risk levels, which offset prices for covering areas of the country with unfavorable levels of risk, such as Virginia, he explained. “But if California goes down — the court rules that the waiver and release is no longer enforceable — it offsets the whole balance. The insurer may not be willing to write recreational risks, or the cost of coverage might be much higher,” Anthony concluded.