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Exculpatory Agreements – Maryland Says Businesses Can Negligently Harm Children

An exculpatory clause is a contractual provision that relieves a party from liability for any future negligent or wrongful act.  Maryland has long recognized that these clauses are valid and that two adults may contractually agree that one or more parties will not be liable for their own negligence.  Recently, however, the Court of Appeals of Maryland has taken this principle one step further and held that parents may sign an exculpatory clause on behalf of their minor children—in essence—agreeing that a company may negligently harm their children and not be held responsible for such conduct.

In BJ’s Wholesale Club, Inc. v. Rosen, Sept. Term 2012, No. 99 (Nov. 27, 2013), BJ Wholesale Club (BJ’s) provided a kids’ play area in its store so that parents could drop their kids off to play while the parents shopped.  Before allowing parents to take advantage of the play area, however, BJ’s required all parents to sign a contractual agreement on behalf of their children.  Included in this agreement was an exculpatory clause protecting BJ’s from any liability for injuries that may be suffered by the children while in the play area.  A child was then seriously injured while using the play area, and subsequently brought a claim alleging that BJ’s had negligently caused the injury.  Relying on the contractual exculpatory clause, BJ’s argued that it was free from all liability for the child’s injuries and the case was dismissed.  The Court of Appeals agreed.

In its Majority opinion, the Court of Appeals began by reviewing Maryland precedent regarding exculpatory agreements.  Specifically, in Wolf v. Ford, 335 Md. 525, 644 A.2d 522 (1994) the Court had previously held that, “[i]n the absence of legislation to the contrary, exculpatory clauses are generally valid, and the public policy of freedom of contract is best served by enforcing the provisions of the clause.”  Id. at 531, 644 A.2d at 525.  Under this precedent, the Court explained that there are three circumstances in which an exculpatory clause will not be enforceable: (1) for intentional harms and extreme forms of negligence; (2) where there is grossly unequal bargaining power; and (3) transactions that affect the public interest.  Conceding that the first two exceptions did not apply, the case focused on the public interest exception.

In explaining this exception, the Court stated that there is no strict set of factors to apply when determining what is in the public interest.  Rather, the Court must apply a totality of the circumstances test, comparing the case against the backdrop of current societal expectations.  In holding that exculpatory clauses on behalf of minor children did not constitute a public interest, the Court relied heavily on the concept that parents are presumed to always act in their children’s best interests.  Supporting this idea, the Court looked to several statutory provisions that allow parents to make important decisions on behalf of their children, including: consent to medical treatment, consent for children to give blood, consent for children to use a tanning bed, consent to the immunization of minor children, ability to commit their child to psychiatric institutions, the ability to home school their children, consent to have children work more than the maximum amount of hours, consent for minor children to marry, ability to bring a case on behalf of child for unpaid support, and consent for child to obtain a hunting license.  The Court, thus, concluded: “From this brief survey of various pieces of legislation, it is clear that parents are empowered to make significant decisions on behalf of their children.”  BJ’s Wholesale Club, at *16.

More than any other statutory provision, however, the Court relied on Section 6-405 of the Courts and Judicial Proceedings Article (CJP), which empowers parents to settle or terminate ongoing litigation on behalf of their minor children.  Specifically, CJP § 6-405 provides: “Any action, including one in the name of the State, brought by a next friend for the benefit of a minor may be settled by the next friend.”  The Court reasoned that this provision “unequivocally affords patents the authority to settle or release negligence claims on behalf of their minor children.”  Id. at *19.  Thus, the Court held “that [the father’s] execution of an exculpatory agreement on behalf of [his child] to allow [the child] to use the Kid’s Club was not a transaction affecting the public interest within the meaning of Wolf, which otherwise would have impugned the effect of the agreement.”  BJ’s Wholesale Club, at *25.

The dissent, authored by Judge Adkins and joined by Judge McDonald, criticized the Majority’s reliance on CJP § 6-405, arguing that § 6-405 deals with the settlement or release of a post-injury claim, and the Majority “fails to grapple with the Petitioner’s claim that a pre-injury waiver of a negligence claim is ‘fundamentally different’ from a release of a claim post-injury.”  Id. at *4 (Adkins, J., dissenting).  The dissent found this distinction to be important because pre-injury releases “immunized [the business] from the effects of future negligent conduct,” which “has a natural tendency to foster negligent practices which are injurious to children.”  Id.  Whereas, post-injury releases have “little to no impact on an organization’s incentive to maintain safe practices and safe premises.”  Id. at *5.  Applying a totality of the circumstances test, the dissent reasoned that, “Parents are signing away their child’s legal right without knowing what injury will befall their child, without equal bargaining strength and without the opportunity to negotiate.”  Id. at *6.  Additionally, reasoned the dissent, under such agreements, “the burden for paying for [the child’s] medical care has shifted from the negligent party, who is in the best position to insure against its negligence, to the victim, or perhaps the hospital, or a governmental entity.”  Id. at *6-7.  Under all the circumstances, therefore, the dissent believed that exculpatory agreements between a commercial entity and a minor child should be invalid as against the public interest.

The important lesson of BJ’s Wholesale Club, Inc. v. Rosen is that exculpatory clauses, in Maryland, continue to have far ranging and significant consequences.  Not only may two competent adults agree to a release of all future negligence claims, but now, minor children can lose their legal right to be compensated for their injuries caused by the negligence of a Defendant.  Before signing a waiver on behalf of yourself or your child, you should carefully read the contract to fully appreciate the significance of what legal rights you are releasing.  If you or your child has suffered a personal injury, and believe you may have signed an exculpatory agreement, it is important to speak with a lawyer to discuss its significance and what actions may be taken to enable you to receive the necessary compensation.  The lawyers at Bekman, Marder & Adkins have significant experience dealing with exculpatory clauses, and we would be happy to discuss your potential personal injury case with you.