8471515526_dcca9ba4b1_zOn February 12, 2015, the Florida Supreme Court affirmed the Fifth District Court of Appeal’s decision in Sanislo v. Give Kids the World, Inc., 98 So. 3d 759 (Fla. 5th DCA 2012) and held that an exculpatory clause was effective to bar a negligence action, despite the absence of express language in the clause releasing the defendant for its own negligence.  The Court reviewed the case based on certified conflict with decisions of the First, Second, Third, and Fourth District Courts of Appeal.

Give Kids the World, Inc. (“GKTW”) is a non-profit organization that provides free vacations to seriously ill children and their families at its resort.  Stacy and Eric Sanislo are the parents of a young girl with a serious illness who wished to participate in GKTW’s program.  The Sanislos executed a liability release in connection with a “wish request” that benefitted their daughter.  The release provided, in pertinent part:

By my/our signature(s) set forth below, and in consideration of Give Kids the World, Inc. granting said wish, I/we hereby release Give Kids the World, Inc. and all of its agents, officers, directors, servants and employees from any liability whatsoever in connection with the preparation, execution, and fulfillment of said wish, on behalf of ourselves, the above named wish child and all other participants. The scope of the release shall include, but not be limited to, damages or losses or injuries encountered in connection with transportation, food, lodging, medical concerns (physical and emotional), entertainment, photographs and physical injury of any kind . . . .

I/we further agree to hold harmless and to release Give Kids the World, Inc. from any and all claims and causes of action of every kind arising from any and all physical or emotional injuries and/or damages which may happen to me/us, or damage to or theft of our personal belongings, jewelry or other personal property which may occur while staying at the Give Kids the World Village.

During the family’s stay at the resort, Mrs. Sanislo was injured.  The Sanislos sued GKTW, alleging that Mrs. Sanislo’s injuries were caused by GKTW’s negligence.  GKTW moved for summary judgment, raising its affirmative defense of the release.  The Sanislos also filed a motion for partial summary judgment on GKTW’s affirmative defense of the release.  The trial court granted the Sanislos’ motion and denied GKTW’s motion.  Following a jury verdict, judgment was entered in favor of the Sanislos.

On appeal, GKTW argued that the lower court erred by denying its motion for summary judgment because the release was unambiguous and did not contravene public policy. The Fifth District reversed the trial court’s denial of summary judgment, holding that the exculpatory clause barred the negligence action, despite the lack of a specific reference to “negligence” or “negligent acts.”  The Fifth District reasoned that exculpatory clauses are effective if the wording of the exculpatory clause is clear and understandable so that an ordinary and knowledgeable person would know what he or she is contracting away.

The Florida Supreme Court began its analysis by stating that while the Fifth District reaffirmed its position that exculpatory clauses are not unenforceable to bar negligence actions simply because they do not contain express language referring to the release of the defendant for negligence, the First, Second, Third, and Fourth Districts, relying on the decision in University Plaza Shopping Center, Inc. v. Stewart, 272 So.2d 507 (Fla. 1973), regarding indemnity agreements, have held the opposite.

The Florida Supreme Court has held that an indemnity agreement only indemnifies the indemnitee for his or her own negligence if the agreement contains a specific provision protecting the indemnitee from liability caused by his or her own negligence.  The Court, however, stated that the principles underlying its opinions regarding indemnity agreements are not applicable to exculpatory clauses.  Generally, indemnification provides a party the right to claim reimbursement for his or her actual damage, loss, or liability from the responsible party.  Indemnification serves the purpose of holding the indemnified party harmless by shifting the entire loss or damage incurred by the indemnified party – who is without active negligence or fault and has been obligated to pay because of some vicarious, constructive, or technical liability – to the responsible party who should bear the cost because it was that party’s wrongdoing for which the indemnified party is held liable.  These contracts are typically negotiated at arms length between sophisticated business entities and can be viewed as an effort to allocate the risk of liability.  Thus, it would not be apparent that a party has agreed to indemnify a party for liability incurred due to that party’s own negligent conduct based on general language in an indemnification agreement.

An exculpatory clause, on the other hand, shifts the risk of injury and deprives one of the contracting parties of his right to recover damages suffered due to the negligent act of the other contracting party.  Although indemnification agreements can sometimes produce the same result as an exculpatory provision by shifting responsibility for the payment of damages back to the injured party, Florida courts recognize a distinction between the two.

Because indemnification agreements allocate the risk of liability for injuries to an unknown third party, specificity is required so that the indemnitor is well aware that it is accepting liability for both its negligence and the negligence of the indemnitee.  Exculpatory clauses, however, primarily release a party from liability for his own negligence, and not vicarious liability. Accordingly, the Court held that University Plaza did not control in this case.

The Court noted that many other states have expressly rejected the requirement that an exculpatory clause contain an explicit provision releasing a party from liability for his or her own negligence.  While it may be better practice to expressly refer to “negligence” or “negligence acts” in an exculpatory clause, the Court found persuasive the reasoning employed by these courts that looked at the parties’ intent in interpreting the contract.  Thus, the Court stated it was reluctant to hold that all exculpatory clauses that are devoid of the terms “negligence” or “negligent acts” are ineffective to bar a negligence action, despite otherwise clear and unambiguous language indicating an intent to be relieved from liability in such circumstances.

The Court stressed that its holding was not intended to render general language in a release of liability per se effective to bar negligence actions, as exculpatory contracts are disfavored in the law and are only enforceable where the language unambiguously demonstrates a clear and understandable intention to be relieved from liability so that an ordinary and knowledgeable person will know what she or he is contracting away.

With its decision, the Court stated that it was rejecting the Sanislos’ invitation to extend University Plaza to exculpatory clauses. Accordingly, it approved the lower court’s decision and disapproved the decisions of the First, Second, Third, and Fourth Districts.

Justice Lewis wrote a dissenting opinion in which he stated that he disagreed with the decision of the majority that an explicit warning regarding what the signing party is contracting away is required for a valid indemnity agreement, but not for combined releases, indemnification, and hold harmless agreements, such as the document in the instant case, as exculpatory clauses that protect a party from his or her own negligence are disfavored.

Image courtesy of Flickr by Matt Spence (no changes).