Reed Smith Client Alerts

Lawmakers at the federal and various state levels have proposed or enacted legislation impacting the potential civil liability faced by various industries as a result of the COVID-19 pandemic. Left with a patchwork of legal requirements and protections, businesses are considering liability waivers or looking to their existing commercial general liability policies to mitigate the impact of potential claims. This Alert addresses actions businesses should consider before implementing liability waivers and assessing potential coverage under their insurance policies.

Authors: Peter L. Kogan

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The enforceability of COVID-19 waivers remains an open question. Assuming such waivers are considered valid, or not rendered moot by proposed legislation, businesses must examine their states’ laws to determine whether their waivers meet their jurisdictions’ specific requirements. In addition, they should keep in mind potential recourse available under commercial general liability (CGL) policies in the event of a COVID-19 exposure claim. This will involve a careful analysis of policy language and applicable law.

Liability waivers

An exculpatory clause is an agreement provision where one contract party waives liability for certain conduct by the other, such as negligence. In general, a valid exculpatory clause in Pennsylvania must satisfy three elements: “First, the clause must not contravene public policy. Second, the contract must be between persons concerning their private affairs. Third, each party must be a free bargaining agent,” so that either party can choose whether or not to enter into the agreement. Tayar v. Camelback Ski Corp., 47 A.3d 1190, 1199 (Pa. 2012) (citation omitted). 

To determine if an otherwise valid exculpatory clause may be enforced, a Pennsylvania court will look to the following guidelines: (1) “[T]he contract language must be strictly construed;” (2) the contract’s intent must be clear and stated with the “greatest particularity;” (3) if ambiguous, the contract must be construed against the party seeking immunity; and (4) the party invoking the clause’s protection has the burden of establishing immunity. Feleccia v. Lackawanna Coll., 215 A.3d 3, 17 (Pa. 2019) (citation omitted).

While Pennsylvania courts have generally upheld exculpatory clauses for dangerous recreational activities, they have invalidated clauses involving banks or common carriers and may distinguish between waivers for “essential” and “nonessential” activities. See McDonald v. Whitewater Challengers, Inc., 116 A.3d 99, 120 n.25 (Pa. Super. Ct. 2015) (citing Dilks v. Flohr Chevrolet, 192 A.2d 682, 687 n.9 (Pa. 1963)); Hinkal v. Pardoe, 133 A.3d 738, 747-48 (Pa. Super. Ct. 2016) (dissent noting various situations “where contracts against liability have been found inimical to public policy,” such as employer-employee relationships, public utilities, hospitals, or airports) (Lazarus, J. dissenting); Chepkevich v. Hidden Valley Resort, L.P., 2 A.3d 1174, 1190 n.18 (Pa. 2010) (noting that “we recognize an inherent policy-based distinction between ‘essential’ activities (such as signing a residential lease) and voluntary, non-essential ones (such as engaging in dangerous sports)”). For example, in Thomas v. First National Bank, the Supreme Court of Pennsylvania found that a bank’s agreement releasing its negligence was contrary to public policy, remarking that “[b]anks, like common carriers, utility companies, etc., perform an important public service” and analogizing a depositor to a common carrier passenger. 101 A.2d 910, 912 (Pa. 1954) (“This Court has consistently decided that it is against public policy to permit a common carrier to limit its liability for its own negligence.”).

Enforceable waivers will not necessarily shield businesses from liability for willful, reckless, or grossly negligent conduct, which will vary between states. See, e.g., Tayar, 47 A.3d at 1199-1203 (holding, in an issue of first impression, that recklessness could not be barred by a ski resort’s pre-injury release for snow tubing). Thus, businesses must remain vigilant in complying with local, state, and federal requirements and guidance.

A business should ensure its waivers are tailored to the risks being assumed by visitors while on its premises or engaging its services — notwithstanding any best practices it has implemented to mitigate exposure to infection. However, a business should also evaluate whether a waiver makes sense for its industry. Legally or practically, requiring a visitor or customer to complete a waiver before entering a building not normally open to the public, or engaging in a purely voluntary activity, may be regarded differently than requiring a waiver before one may access an “essential” service. Relatedly, commercial landlords should exercise caution before requiring executed waivers from anyone entering their buildings. This could introduce unintended disruptions in landlord-tenant relationships, particularly if such a requirement is not discussed with tenants beforehand. Landlords should review their leases for party rights that may be implicated by implementing waivers and should work with their tenants on ongoing exposure mitigation strategies.