New Jersey ski area pushes “indemnification” clause in release too far and gets told by court its release is an adhesion contract.

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Indemnification agreements in releases fail. You cannot write the language in a release to qualify for indemnification. Here the ski area tried to get greedy and got slammed.

Vladichak v. Mountain Creek Ski Resort, Inc., A-1367-20 (N.J. Super. App. Div. Apr 13, 2022)

State: New Jersey; Superior Court of New Jersey, Appellate Division

Plaintiff: Andrea Vladichak

Defendant: Mountain Creek Ski Resort, Inc., Defendant-Appellant, and Michael Lavin, Defendant-Respondent.

Plaintiff Claims: Indemnification from the co-defendant

Defendant Defenses: The indemnification clause was not valid.

Holding: for the Defendant-Respondent

Year: 2022

Summary

After winning a lawsuit from a skier injured in a skier v. skier collision, Mountain Creek Ski Area sued the at fault skier in the collision for damages. The appelleate court found the indemnification clause in the release was not written correct and then found Mountain Creek’s release to be an adhesion contract.

Facts

Defendant Snow Creek, LLC d/b/a Mountain Creek Resort, Inc. (Mountain Creek) appeals from a November 9, 2020 order denying its motion for summary judgment and granting summary judgment to defendant Michael Lavin (Lavin) dismissing Mountain Creek’s cross-claims for defense costs and contractual indemnification. Judge David J. Weaver (motion judge) concluded in a thorough opinion that the contractual language was ambiguous and therefore Mountain Creek was not entitled to indemnification from Lavin or defense costs incurred to defend plaintiff’s allegations that Mountain Creek itself was negligent. We affirm.

On December 21, 2017, plaintiff sustained personal injuries while skiing at a ski area owned and operated by Mountain Creek in Vernon Township, New Jersey. Plaintiff was struck from behind by Lavin, another skier. Plaintiff filed a complaint alleging Mountain Creek and Lavin were negligent. Plaintiff’s complaint alleged Mountain Creek was independently negligent for failing to provide appropriate warnings to skiers, failing to appropriately designate the difficulty of ski trails, failing to provide skiers with appropriate information about trail conditions, failing to timely remove obvious manmade hazards, and/or otherwise failing to establish adequate procedures to provide a safe skiing environment. The complaint alleged Lavin was negligent for breaching his duty to others to ski in a reasonably safe manner by skiing in a reckless manner and/or intentionally colliding into plaintiff and causing her injuries.

Prior to the incident, Lavin signed an equipment rental agreement (Rental Agreement) and lift ticket agreement (Release Agreement) in which he agreed to defend and indemnify Mountain Creek from any claims related to his own conduct and use of the property’s equipment facilities. On August 7, 2019, Mountain Creek filed an answer and cross-claims seeking defense and indemnification from Lavin based on the executed Rental and Release Agreements. Mountain Creek previously tendered the defense to Lavin on July 16, 2019.

Plaintiff’s counsel served a report from plaintiff’s liability expert, who concluded that Lavin violated the New Jersey Ski Statute, N.J.S.A. 5:13-1 to -12, and the Skier’s Responsibility Code by failing to control his speed and course and by failing to yield to the skiers ahead of him. The expert opined that Lavin’s reckless conduct caused the accident. On March 27, 2020, Judge Stephan C. Hansbury entered an order granting Mountain Creek’s motion for summary judgment dismissing plaintiff’s claims that Mountain Creek was negligent. Lavin and plaintiff settled and filed a stipulation of dismissal with prejudice dated May 29, 2020.

After plaintiff’s settlement with Lavin, Mountain Creek filed its motion seeking reimbursement from Lavin for defending plaintiff’s allegations and indemnification from Lavin.[1] Lavin filed a cross-motion for summary judgment on September 1. That led to the order under review.

The judge concluded that, as a matter of law, the indemnification provisions were ambiguous and thus unenforceable to compel indemnification in favor of Mountain Creek for claims of its own negligence. The motion judge denied Lavin’s cross-motion for summary judgment in part and granted it in part. The motion judge requested the parties submit the detail and extent of defense costs incurred by Mountain Creek for costs incurred for which liability was only vicarious.

Simply put, Mountain Creek and Michael Lavin were sued by the original plaintiff Andrea Vladichak for injuries received due to a skier v. skier collision between Lavin and Vladichak. Mountain Creek was dismissed from the original lawsuit. Lavin settled with Vladichak.

The day of the collision, Lavin had rented equipment from Mountain Creek and signed a release as part of the rental agreement. The release had a poorly worded indemnification clause in it. After Lavin settled and Mountain Creek was dismissed, Mountain Creek sued Lavin using the indemnification clause in an attempt to recover the money Mountain Creek spent defending the lawsuit. Mountain Creek lost the original lawsuit and this is the result of the appeal of that trial court decision.

Analysis: making sense of the law based on these facts.

The basis for the reasoning on why Mountain Creek made these moves seems to have been a report from the plaintiff’s expert witness that found Lavin liable for the accident.

Plaintiff’s counsel served a report from plaintiff’s liability expert, who concluded that Lavin violated the New Jersey Ski Statute, N.J.S.A. 5:13-1 to -12, and the Skier’s Responsibility Code by failing to control his speed and course and by failing to yield to the skiers ahead of him. The expert opined that Lavin’s reckless conduct caused the accident.

The trial judge ruled that the indemnification language did not meet the necessary requirements to be valid in New Jersey.

The judge concluded that, as a matter of law, the indemnification provisions were ambiguous and thus unenforceable to compel indemnification in favor of Mountain Creek for claims of its own negligence.

The Appelleate court set forth how contracts in general are examined by the courts and the special requirements of indemnification clauses.

The judge’s role “in construing a contractual indemnity provision is the same as in construing any other part of a contract-it is to determine the intent of the parties.” Generally, courts give contractual provisions “their plain and ordinary meaning.” “However, indemnity provisions differ from provisions in a typical contract in one important aspect. If the meaning of an indemnity provision is ambiguous, the provision is ‘strictly construed against the indemnitee.

Meaning indemnification language is not looked at as whether the parties agreed to the provisions, but whether the writer of the clause did so meeting the strict requirements the courts require to create indemnification.

This is known as the bright line test, do the words in the clause meet the “bright line” test required.

One of the tests as to whether the language in an indemnification clause is written correctly is whether the act that triggers indemnification is identified in the agreement.

Our Court affirmed and held that “in order to allay even the slightest doubt on the issue of what is required to bring a negligent indemnitee within an indemnification agreement, we reiterate that the agreement must specifically reference the negligence or fault of the indemnitee.”

Indemnification clauses cannot use general language and be used to recover money for any action that may cost one party money. They are clauses that must be written to cover the specific acts set forth in the clause.

Here the language failed to meet that requirement.

We agree with the motion judge that the indemnity provisions in the agreements are ambiguous as to claims of Mountain Creek’s independent negligence. Although the provisions reference Mountain Creek’s negligence in bold and capitalized letters, the language “arising out of or resulting from my conduct . . . whether or not MOUNTAIN CREEK’S NEGLIGENCE contributed thereto in whole or in part” is insufficient to meet the Azurak standard. One could reasonably interpret the provisions to require indemnification and defense of Mountain Creek for any claims of negligence against it caused by Lavin’s conduct even when Mountain Creek is partially at fault or to require Lavin to indemnify and defend Mountain Creek for separate claims of its own negligence.

The clause also failed because the acts that gave rise to litigation against Mountain Creek, or the claims, were not the acts or claims that were brought against Lavin. Here again the language of the indemnification agreement was too broad to meet the specific language requirements required by New Jersey Law.

An indemnitor may expect to indemnify and defend an indemnitee for claims caused by its negligent conduct when the indemnitee may also be at fault but may not expect to be solely responsible to indemnify and defend the indemnitee when the indemnitee has committed separate acts of negligence.

The indemnification clause did not cover the acts of Lavin which Mountain Creek was claiming were covered. Again, Mountain Creek wrote a clause using broad language when the courts require specific language.

The provisions at issue do not meet the bright line rule requiring “unequivocal terms” that the duty to indemnify extends to the indemnitee’s own negligence. Thus, the provisions are ambiguous and must be strictly construed against Mountain Creek.

Lavin argued and the court agreed that the release was a contract of adhesion.

As a threshold issue, we determine that the Release and Rental Agreements were contracts of adhesion. If a contract is characterized as a contract of adhesion, “nonenforcement of its terms may be justified on other than such traditional grounds as fraud, duress, mistake, or illegality. An adhesion contract is one that “is presented on a take-it-or-leave-it basis, commonly in a standardized printed form, without opportunity for the ‘adhering’ party to negotiate except perhaps on a few particulars.” “Although a contract of adhesion is not per se unenforceable, a [judge] may decline to enforce it if it is found to be unconscionable.”

Contracts of adhesion are still enforceable; however, they are easier to void and cannot be enforced if found to be unconscionable. By making this argument, Mountain Creek put a label on its release which will make it easier in the future to beat.

The court then looked at the four factors to determine if under New Jersey law a contract is unconscionable.

When determining whether an adhesion contract is unconscionable, we evaluate four factors that “focus on procedural and substantive aspects of the contract to determine whether the contract is so oppressive, or inconsistent with the vindication of public policy, that it would be unconscionable to permit its enforcement.” Those factors include “the subject matter of the contract, the parties’ relative bargaining positions, the degree of economic compulsion motivating the ‘adhering’ party, and the public interests affected by the contract.”

Nothing like the appelleate court of your state setting out the requirements to void your release. The court found that this release was not unconscionable only the indemnification language was void.

So Now What?

Go to far. A ski area sues one of its customers to recover money for the actions of the customer against a third party, not the ski area. That went to far and the New Jersey Appelleate Court slammed Mountain Creek in two ways for doing so.

1. The indemnification clause was void because it was not written correctly.
2. The release was labeled a contact of adhesion, providing a road map for future lawsuits to follow.

Indemnification agreements in releases have not been upheld. You must either write them correctly, which is difficult to do or take them out.

I’ve only read one decision where the indemnification clause was upheld and it was a little different. A federal district court in Massachusetts upholds indemnification clause in a release.

Most decisions do not uphold indemnification clauses.

New Jersey does not support fee shifting provisions (indemnification clauses) in releases in a sky diving case.

Push a release too far, in a state that is not sure Releases should be valid, and you provide the court with the opportunity to void releases and indemnification in the state.

Indemnification fails again in a release. Parent of child having a birthday at climbing gym signed release for the injured child, not her own child.

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