Businesses May Not Be Protected by Standard Liability Releases

By Therese Adams

The Oregon Supreme Court recently delivered an opinion that may well affect how much you pay to ski the slopes of your favorite mountain this season. But that may not be the extent of the decision’s impact. In Bagley v. Mt. Bachelor, Inc., the Court held that enforcement of a ski pass agreement which included a release of all claims for liability against the ski area operator would be unconscionable. However, as the Court acknowledged, the reasoning behind the decision may have implications that affect businesses beyond ski areas. Business owners who invite members of the public to their place of business may want to take heed as well.

Mr. Bagley bought a season pass to ride at Mt. Bachelor and rode the lifts over 100 times in 26 days. It was his third year to buy a season pass, and he classified his skill level as that of an “advanced expert.” Mr. Bagley suffered an injury which left him paralyzed after he snowboarded over a human-made jump at Mt. Bachelor’s “‘air chamber’ terrain park.” He then brought suit against Mt. Bachelor, alleging that the ski area had been negligent in the design, construction, maintenance, and inspection of the jump. Mt. Bachelor defended against the claim by pointing to the release it required of all patrons. The back of the lift ticket included a release of all claims against Mt. Bachelor, Inc. other than those based on intentional misconduct. Each ski lift terminal also had a sign which stated “YOUR TICKET IS A RELEASE” and contained language further explaining the effect of the release. Mr. Bagley argued that the release should not be enforced because it violated public policy and was unconscionable.

The Court noted it had not addressed the issue—whether agreements that release liability in advance of an injury/incident can be enforced—in quite some time. In general, such agreements are valid and may be enforced so long as they do not violate public policy or are unconscionable. A contract may be “unconscionable” because it is negotiated in a way that is inherently unfair to one of the parties, or because it contains terms that are against the public interest (e.g. a contract to commit a crime). Mt. Bachelor argued that its release was not against the public interest, citing prior decisions by Oregon courts holding that releases of liability for basic negligence are against the public interest only when the party provides essential public services.

The Oregon Supreme Court was unconvinced that Mt. Bachelor’s release should be enforced simply because a ski area operator does not provide an essential public service. The Court analyzed the negotiations that led to the release between Mr. Bagley and Mt. Bachelor. Though Mr. Bagley was not surprised by the release because releases of this nature are a common practice at ski areas, Mr. Bagley’s ability to bargain for different terms was all but nonexistent because he was required to agree to all terms if he wanted to purchase the ticket. Furthermore, the Court looked at whether Mr. Bagley would suffer a harsh result if the release were enforced. The Court found that he would, because only Mt. Bachelor was in a position to be aware of and address any hazards it had created on its business premises. The Court also focused on the fact that Mt. Bachelor was the only one in a position to take on the expense of protecting patrons against any hazards, and could spread the cost of doing so among each patron.

The public policy consideration upon which the Court hung its hat was the longstanding concept that business owners should bear responsibility for conditions on their premises that have potential to harm others, referred to as “premises liability.” The idea that a business such as Mt. Bachelor could contract away such liability did not sit well with the Court. In particular, the Court found it in violation of the public’s interest to enforce a release of liability for a business whose facilities were so open to the public that they had become places of “public accommodation.” The Court cited other public accommodation laws that affected Mt. Bachelor operations to support its decision that the ski area should be treated as a public space in this context.

So where does the Bagley v. Mt. Bachelor, Inc. decision leave business owners who wish to limit their liability for accidents that occur on their property? Are these releases completely unenforceable when used by businesses operating recreational facilities? Are they enforceable in different situations? How “public” does a space have to be for the Court to treat it differently? While this decision does not answer those questions, it provides the current framework by which business owners and their attorneys should evaluate the enforceability of these releases. The Court’s decision also left open the door for businesses to give patrons limited bargaining power by way of offering protection for negligence by charging an additional fee or through other methods.

Business owners who use releases and open their facilities to the public, particularly for recreational use or other widespread public use, should take a fresh look at the scope of the release and evaluate any necessary redrafting in light of this decision. This decision also gives business owners cause to reevaluate business insurance coverage to adequately protect against this risk. Changes in how the release is presented may also improve the chances of enforcing the release. Taking these steps may make the difference between an enforceable release you can rely on and an unanticipated lawsuit down the road. Our attorneys are available to evaluate whether any release you currently use may be enforceable, or to answer any other questions you may have about the use of releases in your business.