A Challenging Course

by

Roman v. City of Bristol (Connecticut)
(Employee Injured While Using Rented Recreational Challenge Course Owned and Operated by the City; Employee Sued City and City Sued Employer Citing Indemnity Provisions in Rental Agreement; Court Found Issues of Fact Regarding Whether the Employer and the City Were Both Sophisticated Business Entities with Equal Bargaining Power Such That the Indemnity Provisions Should Be Enforced)

An employer signed a rental agreement with the city that included the rental fee and the date and time for use of a recreational challenge course owned by and located in the city.  An employee of the employer was injured while using the course and she brought a personal injury action against both the city and the city’s course instructor who was present at the time of the incident.  The city then filed a third party lawsuit against the employer for breach of contract and indemnification.  The city alleged that the employer breached the rental agreement by (1) not holding them harmless, (2) not providing them with a legal defense, and (3) failing to secure and maintain an adequate and proper liability insurance policy.  The employer filed a motion for summary judgment arguing that it was not obligated to indemnify the city under the contract for the city’s own alleged negligent conduct.  The trial court granted the employer’s motion, and the city appealed. 

In addition to language requiring the employer to obtain liability insurance and name the city as an additional insured under the policy, the contract provided that the city “shall be held harmless for any and all injuries and or personal loss sustained by members and/or guests of the lessee while on or using the property or equipment owned or rented by the lessor.”  The issue on appeal was the enforceability and scope of that provision.

Citing prior recent Connecticut law, the court noted that exculpatory agreements were disfavored and that they would not allow a party to be released from liability for injuries resulting from his future negligence where there was an inequity of bargaining positions. However, the court explained that “[w]hen applied to contracts to which the parties are sophisticated business entities, the law, reflecting the economic realities, will recognize an agreement to relieve one party from the consequences of his negligence on the strength of a broadly worded clause framed in less precise language than would normally be required, though even then it must evince the unmistakable intent of the parties . . . .”

Although the court noted that both parties to the agreement (the employer and the city)we business entities, it explained that the agreement shared none of the characteristics of a commercial lease that is freely negotiated between two business entities for an extended period of time.  The terms of the agreement were neither negotiated nor bargained for.  Instead, the agreement was a preprinted rental form that the city drafted for use by its customers. Most importantly from the court’s perspective, the broadly worded language used in the hold harmless clause did not adequately put the third party defendant on notice that the third party plaintiffs were seeking to negate liability for their own acts of negligence. As a result, the court held that a genuine issue of material fact existed as to the relationship of the parties and the enforcement of the indemnity provision.

NOTE: Waiver and release agreements in the recreational context have been under attack in the past few years. The courts have struck down exculpatory agreements signed by snow tubers and horseback riders as being contrary to public policy in light of bargaining inequity between the parties. The agreement at issue in this case is less an exculpatory agreement and more an indemnification agreement, whereby two parties are seeking to shift the risks and costs of participant injuries between themselves. The end result is not the elimination of a remedy for the injured participant, but rather a different party bearing responsibility for compensation purposes. Nonetheless, although the court indicated that the enforcement of such indemnity provision can be enforceable, it appears to bend over backwards to focus on bargaining issues and a lack of true negotiation. When dealing with issues of bargaining, courts often lose sight of the substance (e.g., the voluntary nature of a relationship and activity) and instead focus opn the procedure (e.g., the use of pre-printed forms).  Those drafting indemnity provisions in these types of lease agreement should be clear to include reference to the potential negligence of the indemnitee.  Moreover, the indemnitee should make all reasonable efforts to posture the agreement of the parties as a matter of true negotiation.

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