The Exculpatory Clause and its relation to other protective provisions / this may leave you scratching your head April 24, 2018

KEN KIRSCHENBAUM, ESQ
ALARM - SECURITY INDUSTRY LEGAL EMAIL NEWSLETTER / THE ALARM EXCHANGE
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The Exculpatory Clause and its relation to other protective provisions / this may leave you scratching your head
April 24, 2018
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The Exculpatory Clause and its relation to other protective provisions / this may leave you scratching your head  
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    The Exculpatory Clause is one of the provisions used to shift the allocation of risk in the alarm - customer relationship.  Because liability exposure is so broad and unlimited in the security / fire / life safety business, and the actual cause of the loss to the customer is never caused by the alarm company but by someone or something that the alarm is intended to detect, at best, the alarm industry needs to avoid or limit its exposure to lawsuits and damages for damage and losses that the parties do not intend the alarm company be liable for.  This is accomplished only one way, a Contract.  If the contract is not written properly, ironclad, it will not accomplish the result you are hoping for; banking on; depending on.
    In my April 20, 2018 article I reviewed a Minnesota case where the court declined to enforce an Indemnity Clause that it held was not sufficiently drafted,  holding that the clause required great scrutiny and should be strictly construed.  That same court suggested that the indemnity clause should receive even greater scrutiny than an exculpatory clause which was also in the agreement under review.  
    I suggested that courts dealing with these "protective provisions" [indemnity, exculpatory, limitation of liability, etc] often start with the mindset that they don't want to enforce the provision, and then find reasoning to arrive at that result. Perhaps a jaded perspective for a lawyer practicing law for over 43 years, or maybe a fair commentary on our state of the law today.  You should draw your own conclusions.  Of course lawyers who continue to draft agreements with these clauses provide plenty of room for interpretation and confusion.  In the alarm industry most companies do use the Kirschenbaum TM contracts, but not all.  In fact, since ADT doesn't use our contracts, and most [or at least lots] of subscribers sign the ADT contract and those contracts make their way to litigation and we have many cases where those contracts are being interpreted and decisions going both ways, in favor of and against alarm companies.  
    In my April 20, 2018 article I also reviewed a NJ case where the court did enforce an exculpatory clause in a gym contract, but found another way to avoid the consequences of the provisions by keeping the case alive by finding that maybe a jury could find gross negligence. 
    So today we have another NJ case.  Another gym case where the trainer told the customer to get on a treadmill while the treadmill was running [it was gym policy to leave the treadmills running - another great idea by some idiot].  Customer got tossed off as soon as she got on - claimed she didn't know the treadmill was running. [another genius].  This plaintiff had no health issues described in the decision that would have prevented her from knowing that the treadmill was running - or that this was even the first time on the treadmill].  Sadly she suffered a substantial injury requiring spinal surgery for a fractured neck.
    The gym used a contract, no doubt prepared by a lawyer, with what the court called a Waiver Form, which the court also stated was unlike an exculpatory clause.  Here is the clause [maybe you want to "steal it" and use it in your home made alarm contract]
    " I ... waive any and all claims I may have ... against [the fitness club] in connection with or arising out of my participation with [the fitness program] .... I understand that any exercise program carries with it some risk and acknowledge that risk. Further, in consideration of my participation in the [fitness] program, I agree ... to release, indemnify, and hold harmless ... [the fitness club] ... from all liability for any personal injury ... I might sustain during this [fitness] program."
    Here is how the court interpreted the provision and ultimately refused to enforce it [citations and other provisions omitted]:
    It is a longstanding principle of law that business owners in New Jersey have well-established duties of care to patrons that enter their premises.  An owner has a duty to guard against any dangerous conditions that the owner knows about or should have discovered; and to conduct reasonable inspections to discover latent dangerous conditions.  Any attempt to limit these duties by directing patrons to sign exculpatory agreements requires careful attention by our courts. Indeed, our Supreme Court has stated that exculpatory agreements “have historically been disfavored in law and thus have been subjected to close judicial scrutiny.” 
     An exculpatory agreement, and we submit the waiver form, is enforceable if
(1) it does not adversely affect the public interest; (2) the exculpated party is not under a legal duty to perform; (3) it does not involve a public utility or common carrier; or (4) the contract does not grow out of unequal bargaining power or is otherwise unconscionable.
    Plaintiff is correct that the exculpatory clause in Stelluti is different than the waiver form. Nevertheless, applying the Gershon factors, we also conclude the waiver form is unenforceable. It adversely affects the public interest by transferring the redress of civil wrongs from the responsible tortfeasor to either an innocent injured party or society-at-large. It eviscerates the common law duty of care that the fitness center owes to its invitees. And it is unconscionable, as the fitness center has attempted to shield itself from all liability based on a one-sided agreement that offered no countervailing or redeeming societal value.
    Like in Walters, we conclude Stelluti is factually distinguishable. The Court's holding in Stelluti is grounded on the recognition that health clubs are engaged in a business that offer their members a place to use physical fitness equipment by performing strenuous exercises involving an inherent risk of injury. Stelluti, 203 N.J. at 311. Plaintiff did not engage in any activity involving an inherent risk of injury. She followed the instructor's direction and unknowingly stepped onto a running treadmill. Unlike the plaintiff in Stelluti, who was involved in strenuous activity and injured herself while riding a spin bike, id. at 313, plaintiff injured herself while engaged in non-strenuous activity.
    Now let me tell you what I find curious.  Our court system, tracing its routes from England, has been relied on the principle of stare decisis, which is the legal principle of determining points in litigation according to precedent.  Judges are supposed to look for earlier cases and follow those decisions - or explain why they won't. Decisions have been and continue to be published and preserved so that the public and other judges can know the law as developed through case law.
    So here we have a NJ case decided by an appellate court on an issue vital not only to the alarm industry but other industries too [indeed last two cases reviewed here were gym contracts].  In this case the court does not want or expect other courts to follow lead.  Why? I don't know.  But this is how the case is published:
    NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
This opinion shall not “constitute precedent or be binding upon any court.” Although it is posted on the internet, this opinion is binding only on the parties in the case and its use in other cases is limited. R. 1:36-3. Superior Court of New Jersey, Appellate Division.
    I know many of you are tired of being told you need to update and keep your contracts updated.  Don't kill the messenger.  You need proper contracts and you should get them here: [don't believe me?  Call our Contract Administrator Eileen Wagda at 516 747 6700 x 312]   www.alarmcontracts.com
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Ken Kirschenbaum,Esq
Kirschenbaum & Kirschenbaum PC
Attorneys at Law
200 Garden City Plaza
Garden City, NY 11530
516 747 6700 x 301
ken@kirschenbaumesq.com
516 747 6700
www.KirschenbaumEsq.com