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Tennessee Supreme Court makes writing releases a little trickier.

The facts support throwing out the release, but the way the court did makes it tough to write a release.

Copeland v. HealthSouth/Methodist Rehab. Hosp., 2018 Tenn. LEXIS 745

State: Tennessee

Plaintiff: Frederick Copeland

Defendant: MedicOne Medical Response Delta Region, Inc.

Plaintiff Claims: Negligence

Defendant Defenses: Release

Holding: For the plaintiff

Year: 2018

Summary

To get to a physical therapy appointment arranged by a hospital the patient was forced to sign a release. While exiting the car service the plaintiff was injured. The Tennessee Supreme Court worked hard but said if you treat people this badly, we will throw out your release and did.

Facts

Mr. Copeland was a seventy-seven-year-old hospital patient recovering from knee replacement surgery who needed to go to a follow-up appointment at his doctor’s office. Mr. Copeland did not select, hire, or pay MedicOne. Instead, the hospital where Mr. Copeland was a patient arranged for his transportation with MedicOne. The MedicOne driver presented Mr. Copeland with a pre-printed, two-sided document containing two different forms — the Run Report and the Agreement — which Mr. Copeland had limited time to review and sign before being transported to his doctor’s appointment. The Agreement consisted of nine single-spaced paragraphs, including three paragraphs of exculpatory language. The MedicOne driver spent only nineteen minutes at the hospital, which began with his arrival, and included going to Mr. Copeland’s room, pushing Mr. Copeland in a wheelchair to the hospital entrance, getting him into the van, loading his walker into the back of the van, and having Mr. Copeland review and sign the two forms.

The MedicOne driver presented the Agreement to Mr. Copeland on a take-it-or-leave-it basis with the expectation that he would sign it. The driver did not understand the implications of the Agreement, could not have explained it if asked, had no authority to alter it, and would not have transported Mr. Copeland to his appointment if he had not signed the document.

The Agreement consisted of nine single-spaced paragraphs, including three paragraphs of exculpatory language. The exculpatory language provided that Mr. Copeland was releasing MedicOne from any and all claims arising from or in any way associated with any transportation services provided by MedicOne.

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

The facts explain the plaintiff was put in a position where he had no choice, suffer further injury by missing his appointment or sign the document.

The court said releases are fine in Tennessee, but not this one.

We find the exculpatory language in the Agreement to be overly broad and ambiguous. Although the Agreement also contains a severability clause, the three paragraphs containing broad, all-encompassing exculpatory language combined with the severability paragraph do not make it clear and unmistakable what Mr. Copeland was giving up by signing the Agreement, especially during the limited time he was given to read and comprehend the document.

That practical necessity distinguishes this case from those involving purely voluntary or recreational activities, which generally do not affect the public interest or raise public policy concerns.

Based on the circumstances of the parties, including contemporary societal expectations, we conclude that enforcement of the Agreement against a member of the public in Mr. Copeland’s position would be contrary to the public interest.

The court went through the five steps necessary to write a valid release in Tennessee.

First, a party may not, for public policy reasons, exempt itself from liability for gross negligence, reckless conduct, or intentional wrongdoing.

Second, exculpatory provisions in contracts involving common carriers are unenforceable on the grounds of public policy and disparity of bargaining power.

Third, although exculpatory agreements are generally enforceable, in many states they are disfavored.

Fourth, most courts require that the exculpatory language be unequivocal and clear. An exculpatory clause must “clearly, unequivocally, specifically, and unmistakably” state the intention to exempt one of the parties from liability for its own negligence.

Fifth, most jurisdictions do not enforce exculpatory provisions that are contrary to public policy.

Releases in Tennessee are still valid in Tennessee.

After reviewing precedent in this state and across the country, we conclude that the public policy in Tennessee has historically favored freedom of contract. Thus, contracts exempting one party from liability for negligence are not disfavored and are generally enforceable.

However, the court tightened up the requirements for a release to be valid. The court then created 3 factors that any release must meet to be valid in Tennessee.

…we hold that the enforceability of an exculpatory agreement should be determined by considering the totality of the circumstances and weighing these non-exclusive factors: (1) relative bargaining power of the parties; (2) clarity. of the exculpatory language, which should be clear, unambiguous, and unmistakable about what the party who signs the agreement is giving up; and (3) public policy and public interest implications.

The court also decided the bargaining power of the parties should also be taken into consideration.

Relative bargaining power. Although there is no precise rule by which to define sufficient disparity in bargaining power between the parties to invalidate an exculpatory agreement, two key criteria are the importance of the service at issue for the physical or economic well-being of the party signing the agreement and the amount of free choice that party has in seeking alternate services.

The court did carve out a specific exception, to some extent for recreational activities.

That practical necessity distinguishes this case from those involving purely voluntary or recreational activities, which generally do not affect the public interest or raise public policy concerns.

So Now What?

If your activities are in Tennessee or your business is in Tennessee you need to check to make sure your release meets these new requirements.

What do you think? Leave a comment.

Copyright 2018 Recreation Law (720) 334 8529

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Copeland v. HealthSouth/Methodist Rehab. Hosp., 2018 Tenn. LEXIS 745

Copeland v. HealthSouth/Methodist Rehab. Hosp., 2018 Tenn. LEXIS 745

Supreme Court of Tennessee, At Jackson

May 31, 2018, Session Heard at Nashville1; December 20, 2018, Filed

No. W2016-02499-SC-R11-CV

FREDERICK COPELAND v. HEALTHSOUTH/METHODIST REHABILITATION HOSPITAL, LP ET AL.

Prior History: Tenn. R. App. P. 11 [*1] Appeal by Permission; Judgment of the Court of Appeals Reversed; Judgment of the Trial Court Vacated; Remanded to the Trial Court. Appeal by Permission from the Court of Appeals, Circuit Court for Shelby County. No. CT-000196-16. Rhynette N. Hurd, Judge.

Counsel: Donald K. Vowell, Knoxville, Tennessee, and David E. Gordon and Erin L. Hillyard, Memphis, Tennessee, for the appellant, Frederick Copeland.

Diana M. Comes, Memphis, Tennessee, for the appellee, MedicOne Medical Response Delta Region, Inc.

Judges: SHARON G. LEE, J., delivered the opinion of the Court, in which JEFFREY S. BIVINS, C.J., and CORNELIA A. CLARK, HOLLY KIRBY, and ROGER A. PAGE, JJ., joined.

Opinion by: SHARON G. LEE

OPINION

I.

Frederick Copeland was a patient at HealthSouth Rehabilitation Hospital North Memphis (HealthSouth [*3] or the hospital) after having knee replacement surgery. On December 2, 2014, Mr. Copeland had an appointment to see his orthopedic surgeon. The hospital had contracted with MedicOne Medical Response Delta Region, Inc. (MedicOne), a medical transportation company, to provide transportation services for its patients, including Mr. Copeland.

On the day of Mr. Copeland’s appointment at his orthopedic surgeon’s office, a MedicOne employee driving a wheelchair van2 arrived at the hospital to take Mr. Copeland to and from the appointment. After the driver pushed Mr. Copeland in a wheelchair from his room to the entrance of the hospital, Mr. Copeland got out of the wheelchair, walked to the van using a walker, and climbed into the front passenger seat. Before leaving HealthSouth, the MedicOne driver gave Mr. Copeland a pre-printed two-sided document that contained on one side a Wheelchair Van/Transportation Run Report (Run Report) and on the other side a Wheelchair Van Transportation Agreement (Agreement). The Run Report provided that HealthSouth was responsible for MedicOne’s charges. The Agreement consisted of nine single-spaced paragraphs, including three paragraphs of exculpatory language. [*4] The exculpatory language provided that Mr. Copeland was releasing MedicOne from any and all claims arising from or in any way associated with any transportation services provided by MedicOne. After Mr. Copeland signed the Run Report and the Agreement, the MedicOne driver took him to his doctor’s appointment.

After the appointment, the MedicOne driver returned to the doctor’s office to take Mr. Copeland back to the hospital. As Mr. Copeland was getting into the van, he lost his footing on the running board, fell, and was injured.

Mr. Copeland sued MedicOne for negligence in the Shelby County Circuit Court.3 MedicOne moved to dismiss or, in the alternative, for summary judgment based on the exculpatory language in the Agreement. The trial court granted summary judgment in favor of MedicOne.4 The trial court found that the Agreement was not a contract of adhesion and that the services provided by MedicOne were not professional services, but merely transportation services, and so, the exculpatory provisions were enforceable. The Court of Appeals affirmed, finding that the case involved non-professional transportation services and presented no significant public interest considerations. Copeland [*5] v. HealthSouth/Methodist Rehab. Hosp., LP, No. W2016-02499-COA-R3-CV, 2017 Tenn. App. LEXIS 548, 2017 WL 3433130, at *3, *5 (Tenn. Ct. App. Aug. 10, 2017).

II.

The issue here is the validity of the exculpatory language in the Agreement signed by Mr. Copeland releasing MedicOne from any liability. HN3[] We review the trial court’s summary judgment ruling on this question of law de novo with no presumption of correctness. Rye v. Women’s Care Ctr. of Memphis, MPLLC, 477 S.W.3d 235, 250 (Tenn. 2015) (citing Bain v. Wells, 936 S.W.2d 618, 622 (Tenn. 1997)); Circle C Constr., LLC v. Nilsen, 484 S.W.3d 914, 917 (Tenn. 2016) (citing Hamblen Cnty. v. City of Morristown, 656 S.W.2d 331, 335-36 (Tenn. 1983)) (stating that contract interpretation is a question of law).

There is a natural tension between Tennessee’s public policy that favors allowing parties to have freedom to contract5 and the public policy that disfavors allowing a party to escape the consequences of the party’s negligence. In Olson v. Molzen, 558 S.W.2d 429 (Tenn. 1977), we adopted factors to be considered when determining the enforceability of an exculpatory agreement. Olson involved an agreement, signed by a patient before a medical procedure, releasing the doctor from “any present or future legal responsibility associated with” the procedure. Id. at 429-30. The procedure was unsuccessful, and the patient sued the doctor. The trial court dismissed the lawsuit based on the agreement. Id. at 429. The Court of Appeals affirmed the dismissal. Id.

On review, we acknowledged that HN4[] parties may agree that one party will not be liable for negligence to [*6] the other party, subject to certain exceptions. Id. at 430 (citing Moss v. Fortune, 207 Tenn. 426, 340 S.W.2d 902 (Tenn. 1960)). This Court recognized a line of Tennessee cases upholding such agreements,6 but none involving a physician, who is a “professional person operating in an area of public interest and pursuing a profession subject to licensure by the state.” Id. at 430. We distinguished between “tradesmen in the market place” and those “experts” who were practicing state regulated professions. Id. This Court noted that because certain relationships require of one party “‘greater responsibility than that required of the ordinary person,'” an exculpatory agreement between such parties is “‘peculiarly obnoxious.'” Id. (quoting Williston on Contracts § 1751 (3d ed. 1972)). To guide the analysis, this Court adopted a series of factors from Tunkl v. Regents of University of California, 60 Cal. 2d 92, 32 Cal. Rptr. 33, 383 P.2d 441 (Cal. 1963), to be considered in determining whether a transaction affected the public interest:

a. It concerns a business of a type generally thought suitable for public regulation.

b. The party seeking exculpation is engaged in performing a service of great importance to the public, which is often a matter of practical necessity for some members of the public.

c. The party holds himself out as willing to perform this service for any member [*7] of the public who seeks it, or at least for any member coming within certain established standards.

d. As a result of the essential nature of the services, in the economic setting of the transaction, the party invoking exculpation possesses a decisive advantage of bargaining strength against any member of the public who seeks his services.

e. In exercising a superior bargaining power the party confronts the public with a standardized adhesion contract of exculpation, and makes no provision whereby a purchaser may pay additional fees and obtain protection against negligence.

f. Finally, as a result of the transaction, the person or property of the purchaser is placed under the control of the seller, subject to the risk of carelessness by the seller or his agents.

Olson, 558 S.W.2d at 431. Noting that HN5[] not all of these factors must be present for the exception to apply, we found that all the factors were present in Olson and held that the exculpatory agreement was unenforceable. Id. at 431-32.

After our decision in Olson, there was some confusion about whether the Olson factors applied only to exculpatory agreements involving professional services. In two cases, the Court of Appeals determined that the Olson analysis did not [*8] apply because the cases did not involve contracts for professional services. In Schratter v. Development Enterprises, Inc., 584 S.W.2d 459, 461 (Tenn. Ct. App. 1979), the Court of Appeals upheld an exculpatory provision in a residential lease, based in part on its determination that this Court had limited application of the Olson factors to professional service contracts.7 Likewise, in Parton v. Mark Pirtle Oldsmobile-Cadillac-Isuzu, Inc., 730 S.W.2d 634, 636 (Tenn. Ct. App. 1987) (citing Olson, 558 S.W.2d at 430), the Court of Appeals declined to apply the Olson factors to a contract for automobile repair because it concluded that this Court did not intend for the Olson analysis to apply to tradesmen in the market place.8 By the same token, in Petty v. Privette, 818 S.W.2d 743 (Tenn. Ct. App. 1989), the Court of Appeals applied the Olson factors to exculpatory language in a will that was intended to protect the attorney who had drafted the will. Finding only two of the Olson factors were present, the Court of Appeals held that this was insufficient to render the exculpatory clause in the will unenforceable as against public policy. Id. at 746.9

Yet the Court of Appeals in other cases applied the Olson factors when ruling on the enforceability of exculpatory provisions in contracts not involving professional services. In Childress v. Madison County, 777 S.W.2d 1 (Tenn. Ct. App. 1989), the Court of Appeals analyzed an exculpatory release for participation in the Special Olympics. The intermediate appellate [*9] court held that the release did not fall under the exception provided by Olson based on the lack of any business motivations, citing the references in Olson to “‘business, bargaining strength in economic settings, purchasers, and payment of additional fees, to obtain protection against negligence'” and concluded that “the rule was intended to operate primarily in the marketplace.” Id. at 4 (quoting Olson, 558 S.W.2d at 431). The Court of Appeals in Smith v. Peoples Bank of Elk Valley, No. 01A01-9111-CV-00421, 1992 Tenn. App. LEXIS 477, 1992 WL 117061, at *5 (Tenn. Ct. App. June 3, 1992), analyzed an exculpatory provision in a safe deposit box rental contract using the Olson factors. The intermediate appellate court held that the exculpatory provision was unenforceable because all factors were present — safe deposit box rental was regulated by statute and involved a service of great importance to the public; banks hold themselves out as willing to perform this service for any member of the public able to pay the rental fees; banks have greater bargaining power because most people cannot provide that type of protection for their valuables; it was a standardized contract of adhesion not open to negotiation; and the customer’s property was placed under the control of the bank. 1992 Tenn. App. LEXIS 477, [WL] at *4.

In still other post-Olson cases, the Court of Appeals did not mention the Olson [*10] factors or any professional services requirement but relied on the language of the contract to determine the enforceability of the exculpatory provisions. In Hays v. Ernesto’s, Inc., 1987 Tenn. App. LEXIS 2684, 1987 WL 11119, at *2 (Tenn. Ct. App. May 19, 1987), the Court of Appeals found that exculpatory language in a release signed by a party before riding a mechanical bull was enforceable because parties may contract for a release from liability and an assumption of the risk incident to negligence. Similarly, in Buckner v. Varner, 793 S.W.2d 939, 941 (Tenn. Ct. App. 1990), the Court of Appeals upheld a waiver of liability signed by the plaintiff before participating in horseback riding.

After Olson, this Court upheld contractual provisions limiting liability to a sum certain. In Affiliated Professional Services v. South Central Bell Telephone Co., 606 S.W.2d 671, 672 (Tenn. 1980), the Court declined to apply the Olson analysis to a provision in a contract with a telephone company that limited the company’s liability for errors or omissions in yellow pages advertisements to the cost of the advertisement. Citing Smith v. Southern Bell Telephone & Telegraph Co., 51 Tenn. App. 146, 364 S.W.2d 952 (Tenn. 1962) and noting that nearly every appellate court that had considered this frequently litigated issue had upheld the limitation of liability in these contracts with telephone companies, the Court found that the case did not fall within the purview of Olson and upheld the agreement. Affiliated Professional Services, 606 S.W.2d at 672. Later, in Houghland v. Security Alarms & Services, Inc., 755 S.W.2d 769, 773 (Tenn. 1988), this Court upheld a clause limiting the liability [*11] of a company providing security alarm monitoring to a sum certain, citing cases from other jurisdictions and noting that such limitations of liability have generally been upheld in these types of cases against providers of alarm monitoring services. The Court in Houghland mentioned Olson, observing that agreements such as the one examined there would be unenforceable if licensed professional personnel were involved. Id. (citing Olson, 558 S.W.2d 429). Houghland and its progeny involved limitations of liability and liquidated damages provisions, and thus were distinguishable from the agreement in Olson. In addition, the alarm monitoring company in Houghland did not present the contract on a “take-it-or-leave-it” basis, but offered the customer the opportunity to pay more for the services in return for the company assuming greater liability. Id.; see also Underwood v. Nat’l Alarm Servs., Inc., No. E2006-00107-COA-R3-CV, 2007 Tenn. App. LEXIS 305, 2007 WL 1412040 (Tenn. Ct. App. May 14, 2007); E.B. Harvey & Co., Inc. v. Protective Sys., Inc., 1989 Tenn. App. LEXIS 105, 1989 WL 9546 (Tenn. Ct. App. 1989).

In another post-Olson case, Adams v. Roark, 686 S.W.2d 73, 75 (Tenn. 1985), this Court did not reference the Olson factors in finding that a release signed by a participant in a motorcycle race was enforceable in a claim for ordinary negligence.10 Instead, the Court noted that the public policy of Tennessee favors freedom to contract and [*12] that releases from liability in motor racing events are expressly permitted by statute in Tennessee.11
Id. at 75-76.

This Court next considered the applicability of the Olson factors to a nonprofessional services contract in Crawford v. Buckner, 839 S.W.2d 754 (Tenn. 1992). Analyzing an exculpatory clause in a residential lease contract, the Court found that the landlord-tenant relationship satisfied all of the Olson factors, and thus the exculpatory clause in the lease was unenforceable because it was contrary to public policy. Id. at 758-59. The Court explained HN6[] “where there is no declaration in the Constitution or the statutes, and the area is governed by common law doctrines, it is the province of the courts to consider the public policy of the state as reflected in old, court-made rules.” Id. at 759. Thus, “the exception to the freedom of contract rule for exculpatory [provisions] affecting the public interest is also a judicial declaration of public policy.” Id.

The Court in Crawford expressly overruled Schratter and other prior inconsistent decisions, noting Schratter’s conclusion that the Olson factors applied only to contracts involving professional services. Id. at 760. The Court held that “under the facts here,” the exculpatory clause in the lease was against public policy. Id. [*13] This limiting language appears to have added to the confusion about the applicability of the Olson factors because even after Crawford, the inconsistency in application continued.

In some post-Crawford cases, the Court of Appeals determined that the Olson factors did not apply because the agreement did not involve professional services. Petry v. Cosmopolitan Spa Int’l, Inc., 641 S.W.2d 202, 203 (Tenn. Ct. App. 1982) (stating that “Olson did not overrule Empress” because spas are not “businesses ‘of a type generally thought suitable for regulation'”) (quoting Olson, 558 S.W.2d at 431); Floyd v. Club Sys. of Tenn., Inc., No. 01-A-01-9807-CV-00399, 1999 Tenn. App. LEXIS 473, 1999 WL 820610, at *4 (Tenn. Ct. App. July 20, 1999) (finding, based on Petry, that the Olson test did not apply to health club contracts); Henderson v. Quest Expeditions, Inc., 174 S.W.3d 730, 732-33 (Tenn. Ct. App. 2005) (upholding an exculpatory waiver for whitewater rafting because it did not involve a professional trade affecting the public interest); Thrasher v. Riverbend Stables, LLC, No. M2008-02698-COA-RM-CV, 2009 Tenn. App. LEXIS 50, 2009 WL 275767, at *3 (Tenn. Ct. App. Feb. 5, 2009) (quoting Russell v. Bray, 116 S.W.3d 1, 6 (Tenn. Ct. App. 2003)) (upholding an exculpatory provision in a contract for boarding and training horses because the Olson test applied only to agreements involving a professional person).

Yet in other post-Crawford cases, the Court of Appeals applied the Olson analysis to contracts that did not involve professional services. Lomax v. Headley Homes, No. 02A01-9607-CH-00163, 1997 Tenn. App. LEXIS 360, 1997 WL 269432, at *7-9 (Tenn. Ct. App. May 22, 1997) (holding an exculpatory provision in a home construction loan agreement [*14] unenforceable under the Olson analysis); Hancock v. U-Haul Co. of Tenn., No. 01-A-01-9801-CC-00001, 1998 Tenn. App. LEXIS 828, 1998 WL 850518, at *4-5 (Tenn. Ct. App. Dec. 10, 1998) (concluding an exculpatory provision was enforceable in a self-storage facility contract because although three of the Olson factors were present, the “important questions” of state regulation, reasonable alternatives for the plaintiff, and control over the plaintiff’s property were lacking); Lane-Detman, L.L.C. v. Miller & Martin, 82 S.W.3d 284, 293-94 (Tenn. Ct. App. 2002) (applying the Olson analysis to a contract with a law firm to provide background checks and holding that the contract was enforceable because “at most” three of the Olson factors were present, both parties to the contract were sophisticated commercial entities, and the services provided were not subject to regulation); Tompkins v. Helton, No. M2002-01244-COA-R3-CV, 2003 Tenn. App. LEXIS 433, 2003 WL 21356420, at *4 (Tenn. Ct. App. June 12, 2003) (applying the Olson factors to uphold a waiver signed at a racetrack because races are not of great importance to the public or a practical necessity; there was no disparity in bargaining power; and because the activity was voluntary, the plaintiff had not been placed under the control of the racetrack owner); Maxwell v. Motorcycle Safety Found., Inc., 404 S.W.3d 469, 474-75 (Tenn. Ct. App. 2013) (citing Henderson, 174 S.W.3d at 733; Tompkins, 2003 Tenn. App. LEXIS 433, 2003 WL 21356420 at *1) (determining that a release for a motorcycle safety course was enforceable under the Olson analysis because it was a voluntary activity much like a motor speedway race or whitewater [*15] rafting).

In other post-Crawford cases, the Court of Appeals found that exculpatory provisions were unenforceable and against public policy under the Olson analysis specifically because the cases involved professional services or services that affected the public interest in a way analogous to a professional services contract. In Russell v. Bray, 116 S.W.3d 1, 6 (Tenn. Ct. App. 2003) (citing Olson, 558 S.W.2d at 430; Parton, 730 S.W.2d at 636), the Court of Appeals stated that the Olson analysis should be “limited to situations involving a contract with a professional person, rather than a tradesman.” The Russell court found that an exculpatory provision in a home inspection contract was suitable for analysis under the Olson test because unlike tradesmen, home inspectors do not perform hands-on tasks but sell their expert analysis and opinions. Id.; see also Carey v. Merritt, 148 S.W.3d 912 (Tenn. Ct. App. 2004) (holding an exculpatory clause in a home inspection contract unenforceable based on the holding in Russell). In Maggart v. Almany Realtors, Inc., No. M2005-02532-COA-R3-CV, 2007 Tenn. App. LEXIS 482, 2007 WL 2198204 at *5 (Tenn. Ct. App. July 26, 2007) (quoting Olson, 558 S.W.2d at 430-31), aff’d on other grounds, 259 S.W.3d 700 (Tenn. 2008), the Court of Appeals analogized an exculpatory agreement between employer and employee to exculpatory provisions in business contracts with consumers, observing that the relationship was one requiring greater responsibility [*16] on the part of the employer, which would render an exculpatory release in favor of the employer “obnoxious.”

There are also post-Crawford cases in which the Court of Appeals did not mention Olson, but relied solely on the common law of contracts and the language of the agreement to determine the enforceability of an exculpatory provision. Pettit v. Poplar-Union Extended Mini-Storage, 1995 Tenn. App. LEXIS 32, 1995 WL 30602, at *2 (Tenn. Ct. App. Jan. 26, 1995) (holding an exculpatory provision in a self-storage contract enforceable because the language was unambiguous); Burks v. Belz-Wilson Props., 958 S.W.2d 773, 777 (Tenn. Ct. App. 1997) (citation omitted) (finding a release for participation in a work-sponsored athletic event unenforceable because the wording was ambiguous and thus construed against the drafter); Fleming v. Murphy, No. W2006-00701-COA-R3-CV, 2007 Tenn. App. LEXIS 451, 2007 WL 2050930, at *14 (Tenn. Ct. App. July 19, 2007) (citing Ouzts v. Womack, 160 S.W.3d 883, 885 (Tenn. Ct. App. 2004)) (“Under the common law of contracts, we interpret exculpatory clauses according to the plain meaning of their terms.”); Gibson v. Young Men’s Christian Ass’n of Middle Tenn., No. M2015-01465-COA-R9-CV, 2016 Tenn. App. LEXIS 337, 2016 WL 2937320, at *2-3 (Tenn. Ct. App. May 16, 2016) (applying the rules of contract interpretation and looking at the plain meaning of the words to find the exculpatory provision enforceable where the agreement was clear and the plaintiff was injured while using the facilities as contemplated by the parties).

Federal courts have followed suit by inconsistently applying [*17] Olson. See Teles v. Big Rock Stables, L.P., 419 F. Supp. 2d 1003, 1008-09 (E.D. Tenn. 2006) (analyzing a contract with a horse stable under the Olson test and finding that it did not fall under the Olson exception prohibiting exculpatory provisions, although there was a genuine issue of material fact as to gross negligence that precluded summary judgment); Farris v. KTM N. Am., Inc., No. 3:04-CV-354, 2006 U.S. Dist. LEXIS 1635, 2006 WL 73618, at *3 (E.D. Tenn. Jan. 11, 2006) (quoting Olson, 558 S.W.2d at 430) (citing Olson in support of enforcing an exculpatory waiver for test driving motorcycles because it did not involve a service of great importance to the public, but noting that application of the Olson factors is typically limited to a contract for professional services).

This Court has not addressed the enforceability of exculpatory agreements since Crawford in 1992.12 Because of the inconsistency in how these agreements have been reviewed, we take this opportunity to restate the proper analysis to be applied to these agreements.

III.

Although courts throughout the country have taken numerous and varied approaches to exculpatory agreements, there are some common principles.13 First, HN7[] a party may not, for public policy reasons, exempt itself from liability [*18] for gross negligence, reckless conduct, or intentional wrongdoing. Restatement (Second) of Contracts § 195 (1981); Maxwell, 404 S.W.3d at 476 (citing Buckner, 793 S.W.2d at 941).

Second, HN8[] exculpatory provisions in contracts involving common carriers are unenforceable on the grounds of public policy and disparity of bargaining power. 14 Am. Jur. 2d Carriers § 853 (Nov. 2018 update) (noting that public policy forbids relieving carriers of responsibility based on their position of advantage over members of the public who are compelled to deal with them); see also Trailmobile, Inc. v. Chazen, 51 Tenn. App. 576, 370 S.W.2d 840, 841-42 (Tenn. Ct. App. 1963); Moss, 340 S.W.2d at 904. The same rule applies to inns and airports that assume “a duty of public service” to certain segments of the public. 1A Stuart M. Speiser et al., American Law of Torts § 5:39 (Mar. 2018 update).14

Third, HN10[] although exculpatory agreements are generally enforceable, in many states they are disfavored. See 8 Williston on Contracts § 19:25 (4th ed. 1993).15

Fourth, HN12[] most courts require that the exculpatory language be unequivocal and clear. Williston § 19:22. An exculpatory clause must “clearly, unequivocally, specifically, and unmistakably” state the intention to exempt one of the parties from liability for its own negligence. Id. § 19:25; see also, e.g., Parton, 730 S.W.2d at 638 (holding an exculpatory [*19] clause invalid based on a lack of evidence that it had been pointed out to the plaintiff or that “a person of ordinary intelligence and experience” would understand that the agreement relieved the defendant of all liability); Sirek v. Fairfield Snowbowl, Inc., 166 Ariz. 183, 800 P.2d 1291, 1295 (Ariz. Ct. App. 1990) (stating that exculpatory language should alert the party signing the release that “it is giving up a very substantial right”); Sanislo v. Give Kids the World, Inc., 157 So. 3d 256, 261 (Fla. 2015) (holding exculpatory agreements enforceable if the language is “so clear and understandable that an ordinary and knowledgeable person will know what he or she is contracting away”).

Fifth, HN13[] most jurisdictions do not enforce exculpatory provisions that are contrary to public policy. There is no bright line rule defining when a provision is contrary to public policy, but Williston suggests that whether an exculpatory agreement is void as against public policy depends on:

all of the facts and circumstances surrounding the making of the agreement; society’s expectations; the identity and nature of the parties involved, including their relative education, experience, sophistication, and economic status; and the nature of the transaction itself, including the subject matter, the existence or absence of competition, the relative bargaining strength [*20] and negotiating ability of the economically weaker party, and the terms of the agreement itself, including whether it was arrived at through arm’s length negotiation or on terms dictated by the stronger party and on an adhesive, take-it-or-leave-it basis.

Williston § 19:22.

This Court adopted the Olson factors based on the Tunkl analysis. Tunkl, however, is the minority approach, with only five other states currently relying on the Tunkl factors to determine the enforceability of exculpatory provisions.16 Courts in several states have observed that the factors fail to consider the totality of circumstances and, as a result, are overly rigid and arbitrary. See Wolf v. Ford, 335 Md. 525, 644 A.2d 522, 527 (Md. 1994) (declining to adopt Tunkl because of concern that the six fixed factors may be too rigid and arbitrary); Schlobohm v. Spa Petite, Inc., 326 N.W.2d 920, 924 (Minn. 1982) (noting that although a number of courts cite Tunkl with approval, post-Tunkl cases generally consider disparity in bargaining power and whether the agreement involves a public or essential service); Hanks v. Powder Ridge Rest. Corp., 276 Conn. 314, 885 A.2d 734, 744 (Conn. 2005) (stating that public interest cannot adequately be defined within the four corners of a formula, and thus the analysis should be guided but not limited by the Tunkl factors).

After reviewing precedent in this state and across the country, we conclude that HN14[] the public policy in Tennessee has historically favored freedom of contract. Thus, contracts exempting one party from liability for negligence are not disfavored and are generally enforceable. Olson, 558 S.W.2d at 430. That said, not all exculpatory agreements should be enforceable, and courts should determine their enforceability by consideration of the circumstances of the parties, the language used in the agreement, and the public interest. While the factors adopted in Olson remain instructive and may be considered when relevant, the Olson approach is too rigid, fails to consider all the relevant circumstances, and is followed by only a handful of jurisdictions.

We, therefore, need to restate our approach to determining the validity of exculpatory agreements. After surveying the factors adopted by courts in other states17 and considering Tennessee precedent, we hold that HN15[] the enforceability of an exculpatory agreement should be determined by considering the totality of the circumstances and weighing these non-exclusive factors: (1) relative bargaining power of the parties; (2) clarity [*22] of the exculpatory language, which should be clear, unambiguous, and unmistakable about what the party who signs the agreement is giving up; and (3) public policy and public interest implications. HN16[] The totality of the facts and circumstances of each case will dictate the applicability of and the weight to be given to each of these factors. The factors need not be weighed equally in any given case — rather, the analysis should involve balancing each of these considerations given the facts and circumstances surrounding the formation of the agreement. In addition, we hold that there is no “professional services criterion” that restricts application of this analysis to contracts for professional services. Therefore, we overrule Parton, 730 S.W.2d 634; Petty, 818 S.W.2d 743; Petry, 641 S.W.2d 202; Floyd, 1999 Tenn. App. LEXIS 473, 1999 WL 820610; Henderson, 174 S.W.3d 730; Thrasher, 2009 Tenn. App. LEXIS 50, 2009 WL 275767; Russell, 116 S.W.3d 1; Carey, 148 S.W.3d 912; and any other previous decisions to the extent these cases conflict with our holding.

We next turn to defining these factors to provide additional guidance in their application to the facts and circumstances of each case.

Relative bargaining power. HN17[] Although there is no precise rule by which to define sufficient disparity in bargaining power between the parties to invalidate an exculpatory agreement, two key [*23] criteria are the importance of the service at issue for the physical or economic well-being of the party signing the agreement and the amount of free choice that party has in seeking alternate services. Schmidt v. United States, 1996 OK 29, 912 P.2d 871, 874 (Okla. 1996). For example, a standardized form offered on a take-it-or-leave-it basis may be invalid if there was great disparity of bargaining power, no opportunity for negotiation, and the services could not reasonably be obtained elsewhere. Schlobohm, 326 N.W.2d at 924.18

Clarity of language. HN18[] The language of an exculpatory agreement must clearly and unequivocally state a party’s intent to be relieved from liability, and the wording must be “so clear and understandable that an ordinary and knowledgeable person will know what he or she is contracting away.” Sanislo, 157 So. 3d at 260-61.19 The language must also alert the party agreeing to the exculpatory provision that the provision concerns a substantial right. Sirek, 800 P.2d at 1295. The language in the agreement should not be so broad as to relieve the exculpated party from liability for any injury for any reason. Burks, 958 S.W.2d at 777 (holding exculpatory provision relieving the defendant “from any and all liability . . . relating to participation in these events” unenforceable as overly broad and ambiguous); Roberts v. T.H.E. Ins. Co., 2016 WI 20, 367 Wis. 2d 386, 879 N.W.2d 492, 503 (Wis. 2016) (citing Richards v. Richards, 181 Wis. 2d 1007, 513 N.W.2d 118, 121 (Wis. 1994)).20 Ambiguous language [*24] will be construed against the party that drafted the agreement. Burks, 958 S.W.2d at 777.

Public policy and the public interest. HN21[] The third factor, public policy and the public interest, is the most difficult to articulate. Public policy has been defined as “‘that principle of law under which freedom of contract or private dealings is restricted by law for the good of the community.'” Roberts, 879 N.W.2d at 501-02 (quoting Atkins v. Swimwest Family Fitness Ctr., 2005 WI 4, 277 Wis. 2d 303, 691 N.W.2d 334, 339 (Wis. 2005)). A private contract violates public policy if it conflicts with the constitution, statutes, or judicial decisions of this state or tends to be harmful to the public good, public interest, or public welfare. Spiegel v. Thomas, Mann & Smith, P.C., 811 S.W.2d 528, 530 (Tenn. 1991). As this Court explained in Crawford, without a declaration in the constitution or the statutes of Tennessee, a judicial declaration of public policy is within the province of the courts. 839 S.W.2d at 759. Public policy is also determined by societal expectations that are flexible and change over time. See Wolf, 644 A.2d at 527-28 (“The ultimate determination of what constitutes the public interest must be made considering the totality of the circumstances of any given case against the backdrop of current societal expectations.”).

HN22[] Whether the public interest is affected may be determined by considering whether a party to [*25] the transaction has a public service obligation, such as a public utility, common carrier, or innkeeper. Wolf, 644 A.2d at 526. This analysis also includes transactions that are not as readily defined, but are so important to the public good that an exculpatory clause would be contrary to society’s expectations. Id. (quoting Md.-Nat’l Capital Park & Planning Comm’n v. Wash. Nat’l Arena, 282 Md. 588, 386 A.2d 1216, 1228 (Md. 1978)); see also Hanks v. Powder Ridge Rest. Corp., 276 Conn. 314, 885 A.2d 734, 744 (Conn. 2005) (citations omitted) (agreeing with the Maryland and Vermont Supreme Courts that the public interest must be determined based on the totality of the circumstances and that the analysis, guided but not limited by Tunkl, “is informed by any other factors that may be relevant given the factual circumstances of the case and current societal expectations”); Williston § 19:22.

In determining whether the service involved is a public or essential service, courts should consider whether it is a type of service generally considered suitable for public regulation. Schlobohm, 326 N.W.2d at 925-26. And in deciding whether enforcement of an exculpatory provision would be against public policy, courts should consider whether the services involved are of great importance to the public, which are a practical necessity for some members of the public. Id.; see also Plant v. Wilbur, 345 Ark. 487, 47 S.W.3d 889, 893 (Ark. 2001) (upholding release signed by a spectator at a car race because [*26] that activity involved a narrow segment of the public, unlike a public utility, common carrier, or “a similar entity connected with the public interest”).

IV.

In applying this restated analysis to the facts before us, we take the strongest legitimate view of the evidence in favor of Mr. Copeland as the non-moving party for summary judgment and allow all reasonable inferences in his favor. B & B Enters. of Wilson Cnty., LLC v. City of Lebanon, 318 S.W.3d 839, 844-45 (Tenn. 2010); Martin v. Norfolk S. Ry. Co., 271 S.W.3d 76, 84 (Tenn. 2008) (citing Staples v. CBL & Assocs., Inc., 15 S.W.3d 83, 89 (Tenn. 2000)).

We begin with the first factor — disparity in bargaining power. Mr. Copeland was a seventy-seven-year-old hospital patient recovering from knee replacement surgery who needed to go to a follow-up appointment at his doctor’s office. Mr. Copeland did not select, hire, or pay MedicOne. Instead, the hospital where Mr. Copeland was a patient arranged for his transportation with MedicOne. The MedicOne driver presented Mr. Copeland with a pre-printed, two-sided document containing two different forms — the Run Report and the Agreement — which Mr. Copeland had limited time to review and sign before being transported to his doctor’s appointment. The Agreement consisted of nine single-spaced paragraphs, including three paragraphs of exculpatory language. The MedicOne driver spent only nineteen minutes [*27] at the hospital, which began with his arrival, and included going to Mr. Copeland’s room, pushing Mr. Copeland in a wheelchair to the hospital entrance, getting him into the van, loading his walker into the back of the van, and having Mr. Copeland review and sign the two forms.

The MedicOne driver presented the Agreement to Mr. Copeland on a take-it-or-leave-it basis with the expectation that he would sign it. The driver did not understand the implications of the Agreement, could not have explained it if asked, had no authority to alter it, and would not have transported Mr. Copeland to his appointment if he had not signed the document.

Mr. Copeland had a practical necessity to get to his medical appointment. He had the difficult choice of signing the Agreement or delaying or forgoing his medical care that day. Mr. Copeland’s situation was analogous to the difficult choice presented to the plaintiff in Wofford v. M.J. Edwards & Sons Funeral Home, Inc., 490 S.W.3d 800 (Tenn. Ct. App. 2015). There, a funeral home presented the plaintiff with a contract for funeral services after her father’s body had been embalmed. Relying on Buraczynski v. Eyring, 919 S.W.2d 314 (Tenn. 1996), the Wofford court ruled that the arbitration clause in the contract was unenforceable because it was a contract of adhesion, offered on a take-it-or-leave-it [*28] basis, and the plaintiff’s failure to sign the agreement would have interrupted the rendition of services and caused delay, resulting in a “difficult choice.” 490 S.W.3d at 824. Recognizing that the Buraczynski analysis rests on the critical finding of a unique relationship built on trust (such as the doctor-patient relationship in Buraczynski), the Wofford court found that the plaintiff had no realistic choice other than to sign the contract, and that asking her to stop the funeral services at that point would be like asking her “to swap horses midstream.” Id. at 816. Mr. Copeland may not have had a preexisting relationship with MedicOne that was “unique and built on trust,” but he did have a hospital-patient relationship with HealthSouth, the entity that had arranged for his transportation by MedicOne. Mr. Copeland also faced the same kind of difficult choice — refusing to sign the Agreement, offered on a take-it-or-leave-it basis that would have potentially interrupted and caused a delay in his medical care by requiring him to reschedule his appointment or, as the Court of Appeals suggested, calling a taxi. In our view, asking Mr. Copeland to make such a choice would be like asking him to “swap horses in [*29] midstream.” Id. There is ample evidence in the record of relative disparity in the parties’ bargaining power.

We now turn to the second factor — the clarity of the Agreement’s exculpatory language. Much of the exculpatory language appears in bold print and all capital letters. Even so, although portions of paragraphs three and four purport to limit the exculpatory language in those paragraphs to simple negligence by expressly excluding gross negligence and willful misconduct, this limiting language begins by stating, “WITHOUT LIMITATION OF THE FOREGOING . . . .” The “foregoing” in paragraph three reads:

Client does hereby release and forever discharge MedicOne . . . from any and all claims, suits, rights, interests, demands, actions, causes of action, liabilities, accident, injury (including death), costs, fees, expenses and any and all other damages or losses of any kind whatsoever, whether to person or property . . . arising out of, incidental to, associated with, or in any way related to any transportation services provided to Client by MedicOne.

Similarly, the “foregoing” in paragraph four reads:

CLIENT WILL INDEMNIFY, DEFEND AND HOLD HARMLESS MEDICONE RELATED PARTIES FROM AND AGAINST [*30] ANY AND ALL CLAIMS ASSERTED BY CLIENT, ANY PERSON OR ENTITY RELATED TO CLIENT OR ASSERTING A CLAIM BY OR THROUGH CLIENT, OR ANY OTHER THIRD PARTIES OR ENTITIES WHICH, IN ANY WAY, ARISE OUT OF, ARE INCIDENTAL TO, ASSOCIATED WITH, OR IN ANY WAY RELATED TO ANY TRANSPORTATION SERVICES PROVIDED TO CLIENT BY MEDICONE.

Paragraph six contains no limitation for claims of gross negligence or willful misconduct, but purports to release MedicOne from “any liability, damage or expense arising out of any claim in any way associated with or relating to any transportation services provided to Client by MedicOne.”

HN23[] Courts in many jurisdictions, including Tennessee, have found such unlimited language to be so overly broad as to render the provisions unenforceable. See Burks, 958 S.W.2d at 777 (holding release “from any and all liability claims, demands, actions or causes of action whatsoever, arising out of or any injury, illness loss or damage including death relating to participation in these events” unenforceable because it would “extend its exculpation to unbounded limits”); Fisher v. Stevens, 355 S.C. 290, 584 S.E.2d 149, 152-53 (S.C. Ct. App. 2003) (finding a waiver signed at a racetrack to be overly broad and unenforceable based on public policy because the waiver released from liability “any [*31] persons in any restricted area”); Jesse v. Lindsley, 149 Idaho 70, 233 P.3d 1, 7-8 (Idaho 2008) (holding exculpatory clause in a residential lease unenforceable because it purported to release the landlord from liability “for any occurrence of any nature”); Alack v. Vic Tanny Int’l of Mo., Inc., 923 S.W.2d 330, 337-38 (Mo. 1996) (finding exculpatory clause unenforceable based on its ambiguity because the clause did not specifically state that the customer was releasing the health club from liability for negligence and used words like “any” and “all” injuries and claims, which could include intentional or grossly negligent conduct that cannot be excluded from liability); Roberts, 879 N.W.2d at 503 (holding waiver unenforceable because it was too broad and all-inclusive, ambiguous about whether it covered injury while waiting in line for the activity, and was a standard pre-printed form with no opportunity to negotiate).

We find the exculpatory language in the Agreement to be overly broad and ambiguous. Although the Agreement also contains a severability clause,21 the three paragraphs containing broad, all-encompassing exculpatory language combined with the severability paragraph do not make it clear and unmistakable what Mr. Copeland was giving up by signing the Agreement, especially during the limited time he was given to read and comprehend [*32] the document.

Finally, we turn to the third factor — public policy and public interest implications. Mr. Copeland’s appointment with his doctor was a medical necessity. That practical necessity distinguishes this case from those involving purely voluntary or recreational activities, which generally do not affect the public interest or raise public policy concerns. Maxwell, 404 S.W.3d at 475; Henderson, 174 S.W.3d at 733. Although public policy and the [*33] public interest are difficult concepts to define, some relationships require greater responsibility of one of the parties. Olson, 558 S.W.2d at 430. MedicOne was in a position of greater responsibility when it undertook to transport Mr. Copeland to and from his doctor’s office. Mr. Copeland had limited time to read and comprehend the overly broad and ambiguous Agreement and the Run Report. Under these circumstances, it is not reasonable to conclude that Mr. Copeland could have just called a taxi or rescheduled his appointment. HN24[] Our public policy protects patients and clients of professionals, residential tenants, employees, bank customers, and homebuyers from exculpatory provisions. It only makes sense that our public policy should also protect a hospital patient under the circumstances faced by Mr. Copeland when he signed the Agreement. Based on the circumstances of the parties, including contemporary societal expectations, we conclude that enforcement of the Agreement against a member of the public in Mr. Copeland’s position would be contrary to the public interest.

V.

In sum, after considering the totality of the circumstances and weighing the inequality in the relative bargaining power of the parties, the [*34] lack of clarity of the exculpatory language, and the public policy and public interest implications, we hold that, as a matter of law, the exculpatory provisions in the Agreement signed by Mr. Copeland are unenforceable and do not bar his claim against MedicOne. We vacate the judgment of the trial court, reverse the judgment of the Court of Appeals, and remand to the trial court for further proceedings consistent with this opinion. We tax the costs of this appeal to MedicOne Medical Response Delta Region, Inc., for which execution may issue if necessary.

SHARON G. LEE, JUSTICE


Release for a health club which had a foam pit included language specific to the injury the plaintiff suffered, which the court used to deny the plaintiff’s claim.

Argument made that the word inherent limited the risks the release covered and as such did not cover the injury the plaintiff received.

Macias, v. Naperville Gymnastics Club, 2015 IL App (2d) 140402-U; 2015 Ill. App. Unpub. LEXIS 448

State: Illinois, Appellate Court of Illinois, Second District

Plaintiff: Kamil Macias

Defendant: Naperville Gymnastics Club

Plaintiff Claims: negligent in its failure to properly supervise the open gym, train participants, and warn participants of hazards and dangers accompanied with activities and use of equipment in the open gym

Defendant Defenses: Release

Holding: For the Defendant

Year: 2015

Summary

Plaintiff was injured jumping headfirst into a foam pit at the defendant’s gym. The plaintiff had signed a release relieving the defendant of liability, which was upheld by the trial court and the appellate court.

For the first time, the plaintiff argued the release was limited by the language in the release because it used the term inherent in describing the risks. Inherent limits the risks, to those that are part and parcel of the activity and the injury that befell the plaintiff was a freak accident.

Facts

The plaintiff went to the defendant club during open hours when the public could attend with a friend. He paid an admission fee and signed a release. The club had a foam pit. The plaintiff watched other people jump into the pit then tried it himself. He jumped off the springboard and instead of landing feet first he landed head first in the pit.

The plaintiff broke his neck requiring extensive surgery and rehabilitation.

The defendant club filed a motion to dismiss based upon the release signed by the plaintiff. The trial court denied the motion to dismiss because the release was ambiguous.

During discovery, the plaintiff admitted he did not see the rules of the gym but did understand the risks of landing in the pit head first.

Walk around all pits and trampolines,” and he stated that he understood what this meant. The rules also stated: “Do not play on any equipment without proper supervision,” and “Do not do any gymnastics without proper supervision,” and plaintiff stated that he understood what these meant. Plaintiff also stated that he did not see a sign painted on the wall in the gym titled, “Loose foam pit rules.” That sign stated: “Look before you leap,” “No diving or belly flops,” and “Land on feet, bottom or back only.” Plaintiff acknowledged that he understood what these meant

After discovery, the defendant club filed a motion for summary judgment based on the additional information collected during discovery. The trial court granted that motion, and this appeal was dismissed.

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

The appellate court looked at contract law in Illinois.

The primary objective in construing a contract is to give effect to the parties’ intent, and to discover this intent the various contract provisions must be viewed as a whole. Words derive meaning from their context, and contracts must be viewed as a whole by examining each part in light of the other parts. Id. Contract language must not be rejected as meaningless or surplusage; it is presumed that the terms and provisions of a contract are purposely inserted and that the language was not employed idly.

A release is a contract. For the release to be valid and enforceable, it should:

…contain clear, explicit, and unequivocal language referencing the types of activities, circumstances, or situations that it encompasses and for which the plaintiff agrees to relieve the defendant from a duty of care. In this way, the plaintiff will be put on notice of the range of dangers for which he assumes the risk of injury, enabling him to minimize the risks by exercising a greater degree of caution.

The court found the injury suffered by the plaintiff fell within the scope of the possible injuries of the release and contemplated by the plaintiff upon signing the release.

Two clauses in the release stated the plaintiff was in good physical health and had proper physical condition to participate. The plaintiff argued these clauses made the release ambiguous; however, the appellate court did not find that to be true.

Here is the interesting argument in the case.

I have repeatedly stated that releases that limit releases to the inherent risk are limited in their scope. The plaintiff made that argument here.

Plaintiff argues that the use of “inherent risk” language throughout the release creates an ambiguity as to whether the language covers only dangers inherent in gymnastics and not freak accidents. We also reject this argument. As previously stated, the release specifically lists landing on landing surfaces as an inherent risk. Thus, there is no ambiguity as to whether plaintiff’s injury was covered by the release.

The plaintiff also argued his injury was not foreseeable because:

… (1) he lacked specialized knowledge of gymnastics and, in particular, foam pits, to appreciate the danger and foresee the possibility of injury, and (2) his injury was not the type that would ordinarily accompany jumping into a foam pit.

The argument on whether the injury was foreseeable is not whether the plaintiff knew of the risk but:

The relevant inquiry is not whether [the] plaintiff foresaw [the] defendants’ exact act of negligence,” but “whether [the] plaintiff knew or should have known” the accident “was a risk encompassed by his [or her] release.

The court found the injury the plaintiff received was on that was contemplated by the release.

Thus, the issue here is whether plaintiff knew or should have known that the accident was a risk encompassed by the release which he signed. As previously determined, the language of the release in this case was specific enough to put plaintiff on notice. In discussing inherent risks in the sport of gymnastics and use of the accompanying equipment, the release lists injuries resulting from landing on the landing surfaces, which includes injuries to bones, joints, tendons, or death.

The plaintiff also argued the release violated public policy because the release was presented to “opened its gym to the unskilled and inexperienced public” when it opened its gym to the public.

The court struck down this argument because the freedom to contract was greater than the limitation on damages issues.

The appellate court affirmed the trial court’s granting of the summary judgment for the defendant based on the release.

So Now What?

The inherent risk argument here was made but either not effectively argued by the plaintiff or ignored by the court. However, for the first time, the argument that the word inherent is a limiting word, not a word that expands the release was made in an argument.

What do you think? Leave a comment.

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Macias, v. Naperville Gymnastics Club, 2015 IL App (2d) 140402-U; 2015 Ill. App. Unpub. LEXIS 448

Macias, v. Naperville Gymnastics Club, 2015 IL App (2d) 140402-U; 2015 Ill. App. Unpub. LEXIS 448

Kamil Macias, Plaintiff-Appellant, v. Naperville Gymnastics Club, Defendant-Appellee.

No. 2-14-0402

APPELLATE COURT OF ILLINOIS, SECOND DISTRICT

2015 IL App (2d) 140402-U; 2015 Ill. App. Unpub. LEXIS 448

March 10, 2015, Order Filed

NOTICE: THIS ORDER WAS FILED UNDER SUPREME COURT RULE 23 AND MAY NOT BE CITED AS PRECEDENT BY ANY PARTY EXCEPT IN THE LIMITED CIRCUMSTANCES ALLOWED UNDER RULE 23(e)(1).

PRIOR HISTORY: [**1] Appeal from the Circuit Court of Du Page County. No. 11-L-1418. Honorable Judges Hollis L. Webster and John T. Elsner, Judges, Presiding.

DISPOSITION: Affirmed.

CORE TERMS: gym, pit, landing, summary judgment, foam, exculpatory clause, gymnastics, release agreement, surface, inherent risk, jumping, discovery, ambiguity, exculpatory, deposition, injury resulting, public policy, risk of injury, physical condition, releasing, ambiguous, sport, bones, supervision, de novo, springboard, encompassed, notice, undersigned, climbing

JUDGES: JUSTICE BURKE delivered the judgment of the court. Presiding Justice Schostok and Justice Zenoff concurred in the judgment.

OPINION BY: BURKE

OPINION

ORDER


Held: Release agreement for the gym was sufficiently clear, explicit, and unequivocal to show intent to protect facility from liability arising from use of its “foam pit”; it was proper for the gym to raise the issue it had raised in the section 2-619 motion in a summary judgment motion as it alleged new facts which were developed during discovery that affected the validity of the release; affirmed.

[*P2] Plaintiff, Kamil Macias, filed a complaint against defendant, Naperville Gymnastics Club (the Club), for injuries he received after jumping off a springboard and landing head first into a “foam pit.” The trial court denied the Club’s motion to dismiss, pursuant to section 2-619 of the Code of Civil Procedure (Code) (735 ILCS 5/2-619 (West 2010)), but it later granted the Club’s motion for summary judgment based on a liability release agreement signed by plaintiff. Plaintiff raises several issues on appeal concerning the release and the effect of the earlier [**2] section 2-619 motion to dismiss. We affirm.

[*P3] I. BACKGROUND

[*P4] On January 15, 2011, plaintiff came to the Club with his friend. The Club offers “open gym” hours where members of the Club and the general public can attend. Plaintiff, who was not a member of the Club, paid a $10 admission fee and he signed a liability release agreement.

[*P5] A foam pit was located in the gym. After seeing participants jumping into the pit, plaintiff jogged up to a springboard in front of the pit, jumped onto the board and into the pit. While attempting to jump feet first, plaintiff’s body moved in the air, causing him to land head first, striking the bottom of the pit. Plaintiff immediately lost all feeling in his body below the neck. He remained in the pit covered by pieces of foam until he was extracted by the Naperville Fire Department. At the time, plaintiff was 20 years old, about 6 feet tall, and weighed 310 pounds. As a result of the accident, plaintiff suffered a broken neck, requiring extensive surgery and rehabilitation. Plaintiff filed a complaint alleging the Club was negligent in its failure to properly supervise the open gym, train participants, and warn participants of hazards and dangers accompanied with activities [**3] and use of equipment in the open gym.

[*P6] The Club filed a section 2-619(a)(9) motion to dismiss (735 ILCS 5/2-619(a)(9) (West 2010)), alleging that plaintiff signed a two-page liability release agreement that contained an exculpatory clause releasing the Club from liability for any acts of negligence.

[*P7] The trial court found the release ambiguous and denied the section 2-619(a)(9) motion without prejudice. In denying the motion, the judge stated that she felt it was inappropriate to dismiss the suit at that point, that there was case law on both sides of “these exculpatory clauses,” and the judge agreed that it was something that could be developed through discovery. She further stated, “But I think it’s something that is better suited for a summary judgment motion if the facts do bear that out from the defense’s perspective.”

[*P8] During discovery, plaintiff was questioned by defense counsel and testified to the following:

“Q. Okay. That first part of the form it says, ‘To gain admission to the activity areas of [the Club], all parts of this form must be read, understood, and signed.’ Do you see that?

A. Yes.

Q. And did you understand what that means?

A. Yes.

* * *

Q. Did you understand this to be an agreement on January 15th, 2011[,] between you and [the [**4] Club]?

A. Had I read this agreement I would have understood.

* * *

Q. And you understand that [the release] means that when you sign it that you’re agreeing to not bring any lawsuit against [the Club]?

A. Correct.

Q. And if you had read it on January 15th of 2011, that’s what you would have understood it to mean?

A. Correct.

* * *

Q. And you agree that the sport of gymnastics is a risky sport?

A. Correct.

Q: And you would have felt the same on January 15th, 2011[,] before your accident?

A. Yes.”

[*P9] At the entrance to the gym was a closed door with a window pane in it. Plaintiff did not recall seeing a sign on the door entitled, “Rules of the Gym.” Plaintiff reviewed the rules at his deposition and admitted that it said to “Walk around all pits and trampolines,” and he stated that he understood what this meant. The rules also stated: “Do not play on any equipment without proper supervision,” and “Do not do any gymnastics without proper supervision,” and plaintiff stated that he understood what these meant. Plaintiff also stated that he did not see a sign painted on the wall in the gym titled, “Loose foam pit rules.” That sign stated: “Look before you leap,” “No diving or belly flops,” and “Land on [**5] feet, bottom or back only.” Plaintiff acknowledged that he understood what these meant.

[*P10] After discovery, the Club filed a motion for summary judgment, arguing that plaintiff’s claim was barred by the exculpatory clause of the release signed by plaintiff. The motion included the deposition testimony and that (1) plaintiff denied being given any verbal instructions and denied seeing the warning signs or rules posted in the gym before he was injured, and (2) plaintiff admitted that he would have understood the terms of the liability release, had he read it. Following argument, the trial court granted the Club’s motion for summary judgment. This timely appeal follows.

[*P11] II. ANALYSIS

[*P12] A. Standard of Review

[*P13] Summary judgment is appropriate “if the pleadings, depositions, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law.” 735 ILCS 5/2-1005(c) (West 2010). The motion should be denied if there are disputed facts, but also if reasonable people could draw different inferences from the undisputed facts. Wood v. National Liability & Fire Insurance Co., 324 Ill. App. 3d 583, 585, 755 N.E.2d 1044, 258 Ill. Dec. 225 (2001). We review an order granting summary judgment de novo. Pielet v. Pielet, 2012 IL 112064, ¶ 30, 978 N.E.2d 1000, 365 Ill. Dec. 497.

[*P14] We review the parties’ [**6] liability release agreement in accordance with well-established contract principles. Joyce v. Mastri, 371 Ill. App. 3d 64, 74, 861 N.E.2d 1102, 308 Ill. Dec. 537 (2007). The primary objective in construing a contract is to give effect to the parties’ intent, and to discover this intent the various contract provisions must be viewed as a whole. Kerton v. Lutheran Church Extension Fund, 262 Ill. App. 3d 74, 77, 634 N.E.2d 16, 199 Ill. Dec. 416 (1994). Words derive meaning from their context, and contracts must be viewed as a whole by examining each part in light of the other parts. Id. Contract language must not be rejected as meaningless or surplusage; it is presumed that the terms and provisions of a contract are purposely inserted and that the language was not employed idly. Id.

[*P15] In order for an exculpatory clause to be valid and enforceable, it should contain clear, explicit, and unequivocal language referencing the types of activities, circumstances, or situations that it encompasses and for which the plaintiff agrees to relieve the defendant from a duty of care. Calarco v. YMCA, 149 Ill. App. 3d 1037, 1040, 501 N.E.2d 268, 103 Ill. Dec. 247 (1986). In this way, the plaintiff will be put on notice of the range of dangers for which he assumes the risk of injury, enabling him to minimize the risks by exercising a greater degree of caution. Neumann v. Gloria Marshall Figure Salon, 149 Ill. App. 3d 824, 827, 500 N.E.2d 1011, 102 Ill. Dec. 910 (1986). The precise occurrence which results in injury need not have been contemplated by the parties at the time the contract [**7] was entered into. Schlessman v. Henson, 83 Ill. 2d 82, 86, 413 N.E.2d 1252, 46 Ill. Dec. 139 (1980). It should only appear that the injury falls within the scope of possible dangers ordinarily accompanying the activity and, thus, reasonably contemplated by the plaintiff. Garrison v. Combined Fitness Centre, Ltd., 201 Ill. App. 3d 581, 585, 559 N.E.2d 187, 147 Ill. Dec. 187 (1990). Further, when interpreting a contract containing an exculpatory clause, the court must interpret the scope of the exculpatory provision in the “context of the entire agreement.” Shorr Paper Products, Inc. v. Aurora Elevator, Inc., 198 Ill. App. 3d 9, 13, 555 N.E.2d 735, 144 Ill. Dec. 376 (1990). We review the interpretation of an exculpatory agreement or release of liability authorization de novo. Stratman v. Brent, 291 Ill. App. 3d 123, 137, 683 N.E.2d 951, 225 Ill. Dec. 448 (1997).

[*P16] In Garrison, a member of a health club who was injured when lifting weights on a bench press brought suit against the club and the manufacturer of the press. The trial court entered summary judgment in favor of the club, and the plaintiff appealed. The First District Appellate Court held that the exculpatory clause could not have been more clear or explicit, as it stated that each member bore the “sole risk” of injury that might result from the use of weights, equipment, or other apparatus provided and that the selection of the type of equipment to be used would be the “entire responsibility” of the member. The court found that the injury the plaintiff sustained clearly fell within the scope of possible dangers [**8] ordinarily accompanying the activity of weightlifting. Id. at 585. The court observed that the injury was of a type that would normally be contemplated by the parties at the time the contract was made and, therefore, the court held that it clearly fell within the parameters of the exculpatory clause. Id. See also Hussein v. L.A. Fitness International, LLC, 2013 IL App (1st) 121426, 987 N.E.2d 460, 369 Ill. Dec. 833; Neumann v. Gloria Marshall Figure Salon, 149 Ill. App. 3d 824, 500 N.E.2d 1011, 102 Ill. Dec. 910 (1986).

[*P17] Similar to Garrison and the cases cited above, the release agreement in the present case is clear and specific regarding the risks it covers and the release of the Club’s negligence. It specifically references the inherent risk of injury resulting from landing on landing surfaces, and plaintiff acknowledged in his deposition that this phrase includes the foam pit in which he was injured. The agreement also releases the Club from any and all claims, including those caused by its negligence. Furthermore, plaintiff’s signature certified that he recognized the dangers inherent with climbing and jumping activities and that he voluntarily assumed the risks.

[*P18] Nevertheless, plaintiff raises several arguments regarding the validity of the release and the effect of the earlier section 2-619 motion.

[*P19] B. Ambiguity of the Release

[*P20] 1. First Clause

[*P21] The first clause of the release, which is typed in capital letters, states: [**9]

“BY SIGNING THIS DOCUMENT YOU ACKNOWLEDGE THAT UNSUPERVISED USE OF ANY AREA OF FACILITY IS STRICTLY PROHIBITED AND COMPLETELY AT THE RISK OF THE PARTICIPANT AND THAT THE RULES [OF] EACH AREA BEING UTILIZED ARE UNDERSTOOD PRIOR TO PARTICIPATION!”

Plaintiff asserts that this clause is ambiguous as to whether supervision and a full understanding of the rules of the Club is a condition precedent to releasing defendant from liability. We agree that the first clause, standing alone, might be construed as stating that supervision and a full understanding of the rules of the Club is a condition preceding releasing the Club from liability. However, case law teaches that we must review the language of the release in its entirety in order to interpret the parties’ intent.

[*P22] The release contains a “Covenant Not to Sue for Injury or Damages,” which provides, in relevant part:

“Notice: This is a legally binding agreement. By signing this agreement, you waive your right to bring a court action to recover compensation or to obtain any other remedy for any injury to yourself *** however caused arising out of use of the facilities of [the Club].

I hereby acknowledge and agree that the sport of gymnastics [**10] and the use of the accompanying equipment has INHERENT RISKS. I have full knowledge of the nature and extent of all of the risks inherent in gymnastics and the use of the facilities of the gym, including but not limited to:

***

5. Injuries resulting from landing on the landing surfaces; and

6. Injuries to bones, joints, tendons, or death.

[*P23] The section of the release agreement entitled “Release Indemnification Liquidation Damages and Agreement to Arbitrate” states, in relevant part:

“In consideration of my use of the GYM, I the undersigned user, agree to release on behalf of myself *** [the Club] *** including but not limited to a claim of NEGLIGENCE.”

[*P24] The clause of the release immediately preceding plaintiff’s signature provides that “the undersigned recognize[s] the dangers inherent with climbing and jumping activities,” and the undersigned is “assuming the hazard of this risk upon myself because I wish to participate. I realize that I am subject to injury from this activity and that no form of pre-planning can remove all of the danger to which I am exposing myself.”

[*P25] In reading the release in its entirety, it is clear that the first clause of the release cannot be construed as plaintiff argues. The [**11] release contains no such limitations as it covers a number of activities, including “[i]njuries resulting from landing on the landing surfaces” (i.e. the “foam pit”), releasing the Club from negligence, and “the dangers inherent with climbing and jumping activities.”

[*P26] 2. Physical Condition Clause

[*P27] Two clauses of the release request the participant to agree that he or she is in good physical health and proper physical condition to participate. Plaintiff cites Calarco v. YMCA of Greater Metropolitan Chicago, 149 Ill. App. 3d 1037, 501 N.E.2d 268, 103 Ill. Dec. 247 (1986), and Macek v. Schooner’s Inc., 224 Ill. App. 3d 103, 586 N.E.2d 442, 166 Ill. Dec. 484 (1991), for the proposition that these types of clauses render the release ambiguous, as it is unclear whether the release only applies to injuries resulting from a participant’s physical ailments. In other words, the release does not apply to participants without physical ailments.

[*P28] We fail to follow the logic of plaintiff’s argument. However, the cases relied on by plaintiff are readily distinguishable. In Calarco, the plaintiff had been injured when metal weights from an exercise machine fell on her hand, breaking her bones. The plaintiff had agreed “to hold free from any and all liability the [defendant] *** for damages which [the plaintiff] may have or which may hereafter accrue to [the plaintiff] arising out of or connected with [the plaintiff’s] participation [**12] in any of the activities of the [defendant].” We held that the exculpatory clause in the membership application for the defendant’s facility was insufficient to protect the defendant from liability as a matter of law because the clause did not adequately describe the covered activities to clearly indicate that defendant’s negligence would be covered by the release. Calarco, 149 Ill. App. 3d at 1043-44. We further noted that the statement immediately following the alleged exculpatory language contained a declaration of physical health by the signer, and that the combination of the two provisions further complicated the interpretation of the release. Id.

[*P29] In Macek, the plaintiff participated in an arm wrestling contest with a machine that broke his arm. The court held that summary judgment was inappropriate because the release did not specify the covered activities but rather merely indicated that damages for “all injuries suffered” are waived. The court found further that the line immediately following the exculpatory language regarding the signer’s physical condition provided additional ambiguity. Id. at 106.

[*P30] In both Calarco and Marek, the releases did not specify the covered activities and did not specifically cover the defendants’ [**13] negligence. Both courts held that the physical condition clause simply added to the ambiguity of the release. However, contrary to Calarco and Marek, the release in this case clearly covers the activities in question and specifically releases defendant from liability for its negligence.

[*P31] 3. Inherent Risk Language

[*P32] Plaintiff argues that the use of “inherent risk” language throughout the release creates an ambiguity as to whether the language covers only dangers inherent in gymnastics and not freak accidents. We also reject this argument. As previously stated, the release specifically lists landing on landing surfaces as an inherent risk. Thus, there is no ambiguity as to whether plaintiff’s injury was covered by the release.

[*P33] C. Forseeability

[*P34] Plaintiff argues that his injury was not foreseeable because (1) he lacked specialized knowledge of gymnastics and, in particular, foam pits, to appreciate the danger and foresee the possibility of injury, and (2) his injury was not the type that would ordinarily accompany jumping into a foam pit.

[*P35] A plaintiff who expressly consents to relieve a defendant of an obligation of conduct toward the plaintiff assumes the risk of injury as a result of the [**14] defendant’s failure to adhere to the obligation. Larsen v. Vic Tanny International, 130 Ill. App. 3d 574, 576, 474 N.E.2d 729, 85 Ill. Dec. 769 (1984). The doctrine of assumption of risk presupposes, however, that the danger which causes the injury is such that it ordinarily accompanies the activities of the plaintiff, and that the plaintiff knows or should know both the danger and the possibility of injury prior to its occurrence. Id. at 576. The standard is a subjective one geared to a particular plaintiff, and the determination ordinarily will be made by a jury. Id. at 576-77.

[*P36] “The foreseeability of a specific danger defines the scope.” Cox v. U.S. Fitness, LLC, 2013 IL App (1st) 122442, ¶ 14, 377 Ill. Dec. 930, 2 N.E.3d 1211. “The relevant inquiry *** is not whether [the] plaintiff foresaw [the] defendants’ exact act of negligence,” but “whether [the] plaintiff knew or should have known” the accident “was a risk encompassed by his [or her] release.” Hellweg v. Special Events Management, 2011 IL App (1st) 103604, ¶ 7, 956 N.E.2d 954, 353 Ill. Dec. 826.

[*P37] Thus, the issue here is whether plaintiff knew or should have known that the accident was a risk encompassed by the release which he signed. As previously determined, the language of the release in this case was specific enough to put plaintiff on notice. In discussing inherent risks in the sport of gymnastics and use of the accompanying equipment, the release lists injuries resulting from landing on the landing surfaces, which includes [**15] injuries to bones, joints, tendons, or death. Plaintiff agreed that the foam pit was a landing surface and that some of the possible injuries that he could sustain at the gym from gymnastics activities included injuries to his bones, and he admitted at deposition that he had not read the release and that, had he read the release, he would have understood it to mean that he could not sue the gym for any injuries he sustained. Based on these facts, plaintiff should have known the risks of injury associated with the activity of jumping into the foam pit. Plaintiff participated in open gym, which reasonably contemplates participating in the use of the accompanying equipment. Plaintiff could have reasonably presumed that, should he jump from a springboard into the foam pit, he might land on his head. It is entirely foreseeable that, if plaintiff accidently fell on his head, he would be hurt by “landing on the landing surfaces,” a risk encompassed by the release agreement. See Oelze v. Score Sports Venture, 401 Ill. App. 3d 110, 121, 927 N.E.2d 137, 339 Ill. Dec. 596 (2010). Although plaintiff suffered a serious injury, we are bound by the release agreement. Accordingly, we find the trial court properly granted summary judgment on the basis that the release barred plaintiff’s negligence [**16] claim.

[*P38] D. Public Policy

[*P39] Plaintiff next argues that it would be against public policy to enforce the release in this case because the Club opened its gym to the unskilled and inexperienced public. Plaintiff does not cite any cases in support of this argument. In fact, the only case he cites, Hamer v. City Segway Tours of Chicago, LLC, 402 Ill. App. 3d 42, 930 N.E.2d 578, 341 Ill. Dec. 368 (2010), is inapposite to his position.

[*P40] Several cases have rejected plaintiff’s argument in the fitness club setting. See, e.g., Kubisen v. Chicago Health Clubs, 69 Ill. App. 3d 463, 388 N.E.2d 44, 26 Ill. Dec. 420 (1979); Owen v. Vic Tanny’s Enterprises, 48 Ill. App. 2d 344, 199 N.E.2d 280 (1964). Had plaintiff, an adult, read the release and disagreed with it, he could have simply refused to participate in open gym. “While exculpatory or limitation of damages clauses are not favored and must be strictly construed against a benefitting party [citation] the basis for their enforcement is the strong public policy favoring freedom of contract.” Rayner Covering Systems, Inc. v. Danvers Farmers Elevator Co., 226 Ill. App. 3d 507, 512, 589 N.E.2d 1034, 168 Ill. Dec. 634 (1992). There does not seem to be any reason in this case to depart from the strong public policy of allowing parties to freely enter into contracts.

[*P41] E. Section 2-619 Motion to Dismiss

[*P42] The Club filed a section 2-619 motion, alleging that plaintiff signed a two-page liability release that contained an exculpatory clause, which released the Club from liability for any acts of negligence. The trial court found the release was ambiguous and denied the motion. However, [**17] the court recognized that disputed facts might affect the validity of the release and indicated that the Club was free to raise the issue again in a summary judgment motion after facts surrounding the execution of the release were developed in discovery.

[*P43] Citing Makowski v. City of Naperville, 249 Ill. App. 3d 110, 117-18, 617 N.E.2d 1251, 187 Ill. Dec. 530 (1993), plaintiff acknowledges that a trial court may allow a party to reassert a defense after previously ruling on the merits only when new evidence is presented. Plaintiff claims that the summary judgment motion did not allege new facts but simply relied on the language of the release as it did in the Club’s section 2-619 motion. We disagree.

[*P44] The Club did allege additional facts in its summary judgment motion that were developed during discovery that affected the validity of the release. Those facts included plaintiff’s acknowledgment that he understood the meaning of the terms of the release, that he understood the inherent risks, and that he understood that the risk of “landing on landing surfaces” would include the foam pit where he was injured. He also testified that had he read the release he would have understood its language to mean that he could not sue the gym for any injuries he sustained. Since we review a summary judgment motion [**18] de novo (Pielet, 2012 IL 112064, ¶ 30), this evidence tends to defeat plaintiff’s ambiguity arguments.

[*P45] III. CONCLUSION

[*P46] For the reasons stated, we affirm the judgment of the Circuit Court of Du Page County granting the Club’s motion for summary judgment.

[*P47] Affirmed.


Just because you have a piece of paper saying you are an additional insured, it does not mean there is any coverage under any policy to protect you.

Additional insured certificates are limited by two things, what the underlying policy provides coverage for and what the certificate of insurance says it will cover. Lacking  coverage under the policy or lacking the necessary language in the additional insured certificate you are hanging in the wind without any insurance coverage.

For an additional insured certificate to be valid, you must put together three things. A contract which identifies the requirements or insurance you are looking for. An insurance policy that insures those requirements and a certificate of insurance that covers those requirements or better states as the requirements are set forth in the original contract. Lacking any, one of those and you are just wasting paper.

When you get a certificate of insurance, you must then read it to make sure you meet the requirements it may set out. If there is a limitation on the amount of time you have to file a claim or a specific way to notify the insured, make sure you follow those procedures. 

Finally, whenever you file any claim with any insurance company for coverage, follow the procedures the policy requires then follow up with a letter providing notice the insurance company in writing.

Great American Alliance Insurance Company, v. Windermere Baptist Conference Center, Inc., et al., 2017 U.S. Dist. LEXIS 103148

State: Missouri, United States District Court for the Western District of Missouri, Central Division 

Plaintiff: Great American Alliance Insurance Company 

Defendant: Windermere Baptist Conference Center, Inc., et al. 

Plaintiff Claims: Great American now moves for summary judgment on its requested declaratory judgment that: (1) no liability coverage exists under its policy issued to Student Life for any claims asserted in the underlying lawsuit against Windermere or Windermere’s employees, including Kendra Brown; (2) Great American owes no duty to defend Windermere, Kendra Brown, or any other Windermere employees in the underlying lawsuit; and
(3) no medical payments coverage exists for Karlee Richards. 

Defendant Defenses:   No coverage provided under the policy or certificate of insurance

Holding: Split decision, however the insurance company will not pay anything under the certificate of insurance 

Year: 2017 

This is a legally complicated case with simple facts. A church rented a camp from Student Life, which had contracted with a church camp called Windermere. The reservation form and simple agreement between the camp and the church required the issuance of a certificate of insurance. 

A camper, part of the church group fell while riding the zip line. She sued. That lawsuit was still pending when this lawsuit was started to determine whose insurance was required to defend against the camper’s lawsuit. 

In that case, damages are being sought against them for injuries sustained by Karlee Richards after she fell while zip-lining at The Edge, a ropes course at Windermere’s Conference Center. Kendra Brown was an employee of Windermere, working at the Edge at the time of  the accident.

 The injured camper Richards was with the Searcy Baptist Church. They rented the camp through Student Life. Student Life rented the camp from Windermere. The contract between Student Life and Windermere is the one at question here. Windermere required a certificate of insurance from Student Life. 

June 2014, Karlee Richards and her Searcy Baptist Church youth group were attending a summer camp at Windermere’s Conference Center, which was sponsored by Lifeway Christian Resources of the Southern Baptist Conference, d.b.a. Student Life. Student Life contracted with Windermere to hold the church camp at Windermere’s facility in Missouri. Student Life had a liability policy with Great American, and Windermere was an additional insured on that policy. The additional insured endorsement provides that the additional insured, in this case Windermere, is only covered for “liability arising out of the ownership, maintenance or use of that portion of the premises leased to Great American contends that Windermere is not entitled to coverage for Kaylee Richards’s injuries because Windermere did not “lease” the Edge to Student Life because the Edge was not specifically mentioned in Student Life’s written agreement with Windermere.

 The first issue the court skipped was the policy that Student Life had, was restrictive and had minimal coverage. It had a requirement that all claims had to be made in one year. This may not be bad, but if the statute of limitations for the type of injury is two years or three, you may not have coverage for a claim because you did not know you had one until after the time period had run. 

Student Life is the named insured on a Commercial General Liability policy with Great American. The policy requires that all requests for medical payments be made within one year of the accident that gives rise to the insurance claim. Also, when there is other valid and collectible excess insurance coverage, the Great American policy provides that Great American will have no duty to defend its insured against a claim for damages.

 On top of the claim limitation period, the coverage was solely excess coverage. Meaning the coverage did on top of any other coverage the insured had and had no duty to defend or pay for attorneys. It only had to pay for a claim after the
limits of the underlying policy were exhausted. No underlying policy was ever mentioned in the case so it is unknown if one existed.

If this is the only policy, Student Life purchased, they bought the wrong one! 

Another issue was whether the student life policy would provide coverage for employees of Windermere that were sued based on the accident. 

This suit was brought by the Student Life insurance company, Great American Alliance Insurance Company, asking the court to tell Student Life it was not going to pay or defend any of the claims brought by the injured camper against Windermere. 

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

 The court first looked at whether the additional insured certificate was ambiguous. If so, then the court had to interpret the ambiguity under Missouri’s law.

An ambiguity is an uncertainty in the meaning of the policy.

  If an ambiguity exists, the policy language will be construed against the insurer. Mendota, “‘An ambiguity exists when there is
duplicity, indistinctness, or uncertainty in the meaning of the language of the policy.'” “‘To test whether the language used in the policy is ambiguous, the language is considered in the light in which it would normally be understood by the lay person who bought and paid for the policy.'” Whether an insurance policy is ambiguous is a question of law.” 

The burden of proving there is coverage falls on the party seeking it, in this case, Windermere. An ambiguity exists if there are different interpretations of the language in the policy. There are two types of Ambiguities, Latent and patent. 

A policy is ambiguous if it is “fairly open to different interpretations” because it contains “duplicity, indistinctness, or uncertainty of meaning.” Importantly, there are two types of ambiguities in the law: patent and latent. “A patent ambiguity is detected from the face of the document, whereas a latent ambiguity is found ‘when the particular words of a document apply equally well to two different objects or some external circumstances make their meaning uncertain.'” 

Here the court found that a patent ambiguity existed. 

For these reasons, a patent ambiguity exists. The disputed phrase not only should be interpreted in favor of the Defendants, but the Defendants’ interpretation is arguably the only one that would make sense to an ordinary person under these circumstances. 

The court also found a latent ambiguity existed in the certificate of insurance. 

A latent ambiguity exists when a contract “on its face appears clear and unambiguous, but some collateral matter makes the meaning
uncertain.” Id. In other words, an ambiguity is “latent if language, which is plain on its face, becomes uncertain upon application.”

 If an ambiguity is found in an insurance policy, the ambiguity is construed against the insurance company. “In the
alternative, it is well-settled that an ambiguity within an insurance policy must be construed against the insurer
.”

Consequently, the court ruled on this issue, that there was coverage for Windermere from the Student Life Policy. However, the court found against Student Life and Windermere on the other issues.

Windermere requested coverage for defending its employees, which the court denied. 

Great American argues that no coverage exists for Brown or any other Windermere employee because the Additional Insured Endorsement does not provide additional insured status and/or coverage for an additional insured’s employees. Brown is not identified anywhere in Student Life’s Great American policy nor is she listed as an Additional Insured on a Certificate of Liability. Therefore, any coverage for Brown would necessarily derive from her status as Windermere’s employee, and employees are not covered as insureds by the Additional Insured Endorsement. 

The court agreed with Great American that no coverage was described in the certificate of insurance. 

The next issue was, whether or not there was a duty to defend. A duty to defend is to pay the cost of the lawsuit; attorney fees, expert witness fees, etc. 

Under Missouri law, the duty to defend “arises whenever there is a potential or possible liability to pay based on the facts at the outset of the case and is not dependent on the probable liability to pay based on the facts ascertained through trial.” 

Because there was no coverage for the Windermere employees, there was no duty to defend them either. A duty to defend must be specifically identified in the policy. In this case the policy specifically stated, there was no duty to defend. 

As to whether Great American owes a duty to defend Windermere, the Endorsement makes clear that any coverage for Windermere as an additional insured would be excess, and the policy does not afford a defense when (1) its coverage is excess and (2) when the insured is being provided a defense by another carrier. 

The last issue was whether medical expenses of the injured camper were owed by Great American to Windermere. Again, since the policy specifically stated there was no coverage for medical expenses this was denied. The court also found the
requirement under the policy to make a claim for medical expenses had to be done within one year, and that time had lapsed; therefore, no medical expenses were owed by the Student Life Policy with Great American. 

The decision was split, however, in reality; Windermere got nothing from the decision. If Windermere lost its suit or exhausted its own liability insurance policy protection, it could, then see money from the Student Life policy with Great American, but no other coverage was owed by Great American. However, that meant the camper was going to have to win millions probably to exhaust the Windermere policy and Windermere or its insurance company was going to foot the bill with no help from the policy under the certificate of insurance. 

So Now What? 

This is a classic case were not knowing or checking what happens when you receive an additional insured certificate ends up costing you more money than not having one. 

The underlying policy by the group coming into the camp was crap. On top of that it had major restrictions on when it would pay. Add to those issues the certificate of insurance was badly written and the company receiving the additional insured certificate received a worthless piece of paper. On top of that it cost them a lot of money I’m guessing to sue to find out they were not going to get anything from the policy.

 1.       Issue a request for a Certificate of Insurance in a contract or the contract. Set forth in the contract everything you must have and the type of insurance policy that must be underlying the certificate of insurance.

2.      Request a copy of the insurance policy be delivered with the certificate of insurance. Again, if the policy is crap, you are getting crap. 

3.      Make sure the insurance policy covers what the contract says it should cover. 

4.      Make sure the certificate of insurance covers what the contract says it must cover. 

Just collecting certificates of insurance to put in a box or file cabinet are only killing trees. It is probably not providing you any protection as in this case.

 What do you think? Leave a comment.

 To Comment Click on the Heading and go to the bottom of the page. 

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Great American Alliance Insurance Company, Plaintiff, vs. Windermere Baptist Conference Center, Inc., et al., 2017 U.S. Dist. LEXIS 103148

Great American Alliance Insurance Company, Plaintiff, vs. Windermere Baptist Conference Center, Inc., et al., 2017 U.S. Dist. LEXIS 103148

Great American Alliance Insurance Company, Plaintiff, vs. Windermere Baptist Conference Center, Inc., et al., Defendants.

No. 2:16-cv-04046-NKL

United States District Court for the Western District of Missouri, Central Division

2017 U.S. Dist. LEXIS 103148

July 5, 2017, Decided

July 5, 2017, Filed

PRIOR HISTORY: Great Am. Alliance Ins. Co. v. Windermere Baptist Conf. Ctr., Inc., 2016 U.S. Dist. LEXIS 92701 (W.D. Mo., July 18, 2016)

COUNSEL: [*1] For Great American Alliance Insurance Company, Plaintiff: John S. Sandberg, LEAD ATTORNEY, Kenneth R. Goleaner, Sandberg, Phoenix & von Gontard, PC-St. Louis, St. Louis, MO.

For Windermere Baptist Conference Center, Inc., Defendant: Amber Joy Simon, Lauren E. Tucker McCubbin, LEAD ATTORNEYS, Lisa A. Weixelman, Polsinelli PC – KCMO, Kansas City, MO.

For Kendra Brown, Defendant: Christopher P. Rackers, LEAD ATTORNEY, Kaci R Peterson, Schreimann, Rackers & Francka, LLC, Jefferson City, MO.

For Jeremy Richards, Karlee Richards, Defendants: Patrick M. Martucci, LEAD ATTORNEY, Johnson, Vorhees & Martucci – Joplin, Joplin, MO.

JUDGES: NANETTE K. LAUGHREY, United States District Judge.

OPINION BY: NANETTE K. LAUGHREY

OPINION

ORDER

This case principally concerns whether Defendants, Windermere Baptist Conference Center and Kendra Brown, have insurance coverage under a Great American policy for potential liability in a suit pending in Morgan County. In that case, damages are being sought against them for injuries sustained by Karlee Richards after she fell while zip-lining at The Edge, a ropes course at Windermere’s Conference Center. Kendra Brown was an employee of Windermere, working at the Edge at the time of the accident.

In [*2] June 2014, Karlee Richards and her Searcy Baptist Church youth group were attending a summer camp at Windermere’s Conference Center, which was sponsored by Lifeway Christian Resources of the Southern Baptist Conference, d.b.a. Student Life.1 Student Life contracted with Windermere to hold the church camp at Windermere’s facility in Missouri. Student Life had a liability policy with Great American, and Windermere was an additional insured on that policy. The additional insured endorsement provides that the additional insured, in this case Windermere, is only covered for “liability arising out of the ownership, maintenance or use of that portion of the premises leased to [Student Life] [by Windemere].” [Doc. 35-17, p.1 (“Endorsement”)]. Great American contends that Windermere is not entitled to coverage for Kaylee Richards’s injuries because Windermere did not “lease” the Edge to Student Life because the Edge was not specifically mentioned in Student Life’s written agreement with Windermere.

1 Lifeway Christian Resources of the Southern Baptist Convention does business as Student Life. The Court refers to Lifeway and Student Life interchangeably throughout the remainder of this Order as simply, “Student Life.”

Pending before the Court is Great American’s Motion for Summary Judgment. [Doc. 34]. For the following reasons, the Motion is granted in part and denied in part.

I. Undisputed Facts2

2 Unless otherwise noted, the facts recited are those which are properly supported and undisputed.

A. The Student Life [*3] Camp at Windermere

Windermere Baptist Conference Center is a large Conference Center on the Lake of the Ozarks with over 300 acres and 126 buildings, including group lodging, a dining hall, conference space, cabins, a chapel, and a gift shop. Windermere also offers various recreational facilities and activities at its campus, including the Edge. Organizations like Student Life use Windermere’s facilities for summer church camps.

Student Life had been conducting camps at Windermere for about ten years prior to its June 2014 camp. In January 2014, Student Life and Windermere executed an Amended Conference Contract. The “Amended Conference Contract,” provides:

Amended Conference Contract

. . .

EVENT INFORMATION

Event Name: Student Life #1 ’14 (June 2-6, 2014)

Expected #: 1000

Arrive Date: Saturday, May 31, 2014

(Check in begins at 3:00 PM. Rooms may not be available until 6:00 PM. . .)

Depart Date: Saturday, June 7, 2014

Lodging Check out time is 11:00 AM. Keys must be turned in by this time. . .)

LODGING INFORMATION

Lodging Type Start End Nights Units Cost Total
Per Person (Student Life Extra) 5/31/14 6/2/14 2 25 $17.50 $825.00
Per Person (Student Life Extra) 6/1/14 6/2/14 1 15 $17.50 $262.50
Per Person (Student Life [*4] ’14) 6/2/14 6/5/14 4 1,000 $70.00 $70,000
Minimum
Total for Lodging: $71,137.50 $56,910.00

You will need to provide Windermere a rooming list (names of individuals occupying each room) and a copy of your conference or retreat schedule at the time of check-in.

. . .

MEAL INFORMATION

Minimum
Total for Meals: $76,570.00 $61,733.00

. . .

All guests eating in the dining hall must have a meal ticket or wrist band to be

admitted into the Dining Hall.

. . .

CONFERENCE SPACE INFORMATION

Facility/Room Start End Cost
Wilderness Creek Auditorium (1500) 6/1/14 8:00am 6/6/14 12:00pm
Deer Ridge Conf Rm 1 (30) 6/2/14 3:00pm 6/6/14 12:00pm
Total for Conference Space: $0.00

. . .

Use of conference space and facilities begins at the start time stated in the contract. Conference or facility space usage time ends at the time stated in the contract and must be empty of all guests and guest items.

. . .

ENTITY OBLIGATION

Estimated Total Payment $147,707.50
Total Minimum Payment $118,643.00
Property Damage/Abuse

The above named group will have financial responsibility for any damages and excessive wear and tear it incurs to the Windermere grounds, facilities or property to the extent that such damage or excessive wear and tear arises [*5] from the negligence or willful misconduct of the above named group. Cleanup of any facilities or grounds that are excessively dirty will be the financial responsibility of the group.

[Doc. 35-5 (“Amended Conference Contract”)].

The parties’ Amended Conference Contract does not identify every building or activity that was available to campers during Student Life’s camp at Windermere. For example, the chapel, which is made available to any group attending a camp at Windermere, is not listed. In addition, the dining hall is not specifically listed under the “Conference Space Information” heading, despite the Amended Conference Contract listing a price for meals Windermere is to provide.

In addition, it is undisputed that Windermere offered various free recreational activities to its guest campers, including those who attended the Student Life camp. Windermere also offered some special recreational activities that required an additional fee and reservations. The Edge was one such activity. The Edge, a ropes and zip-lining course, is not accessible to campers at Windermere without special scheduling, the purchase of tickets, and the execution of a “Recreational Release” form. Student Life [*6] advertised Windermere’s recreational facilities, including “The Edge,” as available for use to its campers, and it was Student Life’s expectation that these facilities would be available.

In addition to the Amended Conference Contract, Student Life also completed a Facilities Request Form, and Windermere completed a Fax Back Response Sheet. [Docs. 40-3 and 40-4]. The Fax Back Response Sheet provides:

Student Life Camp

Windermere Conference Center

Recreation:

. . .

What are some free-time options on your campus?

o Sand Volleyball, Outdoor Basketball, Tennis, Mini Golf, Disc Golf, Pool, Hiking, The Edge (low/high ropes course), Paintball, Waterfront Activities (Inflatable water park, kayak, canoe, paddle boats, fishing, etc) (See attached PDF on available Recreation Packages).

[Doc. 40-4, p. 3].

B. Great American Insurance Policy

Student Life is the named insured on a Commercial General Liability policy with Great American. The policy requires that all requests for medical payments be made within one year of the accident that gives rise to the insurance claim. [Doc. 42-2, p. 62 of 166]. Also, when there is other valid and collectible excess insurance coverage, the Great American policy provides [*7] that Great American will have no duty to defend its insured against a claim for damages. [Doc. 42-2, p. 67-68 of 166].

Because Student Life was contracting with Windermere for its event, Windermere was named as an additional insured on Student Life’s Great American policy. The Certificate of Liability Insurance was issued by Great American on May 8, 2014, and Windermere accepted. The Certificate referenced Great American’s policy issued to Student Life, Policy No.: GLP 0310189 and stated:

Event: Student Life Event Dates: May 31-June 7 and June 14-20, 2014 Windermere Conference Center is included as Additional Insured on the General Liability policy, as per endorsement #CG 82 24, ed. 12/01, and on the Automobile Liability policy, as per endorsement #CA 8518, ed. 6/09.

[Doc. 35-7 (“Certificate of Liability Insurance”)].

C. The Underlying Lawsuit

The Searcy Baptist Church youth group was one of the groups of campers that attended Student Life’s camp at Windermere in June of 2014. Karlee Richards and the rest of the Searcy youth group were scheduled to ride The Edge on June 4, 2014. They paid Windermere an additional fee for this activity. While zip-lining at The Edge that day, Richards fell [*8] and was injured. Kendra Brown, a Windermere employee, was working at the Edge at the time of the accident.

Following Karlee Richards’s accident at The Edge, her father, Jeremy Richards, both individually and as Next Friend, brought suit against Windermere and several of Windermere’s employees, including Kendra Brown. This lawsuit is currently pending in the Circuit Court of Morgan County, Missouri and seeks damages for Karlee Richards’s physical injuries sustained at The Edge.

On November 17, 2015, Windermere and Kendra Brown tendered claims to Great American for defense and indemnity of the underlying lawsuit, seeking coverage as additional insureds under Student Life’s Great American policy. [Doc. 35-15 (“Demand Letter”)]. The letter also demanded Medical Payments coverage for Karlee Richards’s medical expenses. The demand for Medical Payments coverage was made more than one year after Richards’s June 4, 2014 accident at The Edge. [Docs. 35-15 (“Demand Letter”) and 35-18 (“Feb. 4, 2016 Denial Letter”)].

Great American responded to the parties’ demand letter with a request for additional information, including information regarding Windermere’s coverage through Church Mutual Insurance [*9] Company. Windermere’s insurer, Church Mutual, was defending Windermere in the underlying lawsuit. [Doc. 35-14, p. 1 of 7 (“Dec. 17, 2015 Letter”)]. In subsequent correspondence with Great American, Windermere also stated, “Church Mutual, the insurer for ‘Windermere’ has tendered its full two million dollars in liability insurance.” [Doc. 35-14, p. 1 of 7 (“Dec. 17, 2015 Letter”)].

In its February 4, 2016 denial letter to Windermere and Brown, Great American concluded that Richards’s accident did not arise out of the ownership, maintenance, or use of the premises Windermere leased to Student Life and denied Windermere’s tender. Great American’s letter also provided that:

[E]ven if indemnity coverage did exist for Windermere and Kendra Brown under the Lifeway Policy, it is also clear that that [sic] Great American owes no defense obligation of the pending lawsuit. Your December 17, 2015 correspondence renewing the tender of defense on behalf of both Windermere and Kendra Brown makes clear that Windermere is being afforded a defense by Church Mutual and that Kendra Brown is being defended by both Church Mutual and Shelter. . . . [T]he Social Service Agency General Liability Broadening Endorsement [*10] makes clear that any coverage that did exist would be excess over all other insurance, including both the Church Mutual and Shelter policies. The “Other Insurance” provision of the Lifeway Policy makes clear that, where its coverage is excess and a defense is being provided by another carrier, Great American owes no duty to defend. Hence, Windermere’s and Kendra Brown’s tender of the defense of the pending lawsuit is denied for this additional reason.

[Doc. 35-18, p. 6 (“Feb. 4, 2016 Denial Letter”)]. Great American also denied Brown’s tender, stating that she was not an additional insured on the policy. Id.

II. Discussion

Windermere seeks coverage in the underlying Morgan County lawsuit as an additional insured under the Great American policy issued to Student Life. After denying Windermere’s tender, Great American filed suit before this Court seeking a declaratory judgment regarding its obligations under the policy. Great American now moves for summary judgment on its requested declaratory judgment that: (1) no liability coverage exists under its policy issued to Student Life for any claims asserted in the underlying lawsuit against Windermere or Windermere’s employees, including Kendra [*11] Brown; (2) Great American owes no duty to defend Windermere, Kendra Brown, or any other Windermere employees in the underlying lawsuit; and (3) no medical payments coverage exists for Karlee Richards.

A movant is entitled to summary judgment “if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law.” Fed. R. Civ. P. 56(c). The rule requires summary judgment to be entered “against a party who fails to make a showing sufficient to establish the existence of an element essential to that party’s case, and on which that party will bear the burden of proof at trial.” Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106 S. Ct. 2548, 91 L. Ed. 2d 265 (1986).

A federal court sitting in diversity applies the choice-of-law rules of the state where the court sits, in this case, Missouri. Klaxon Co. v. Stentor Elec. Mfg. Co., 313 U.S. 487, 496, 61 S.Ct. 1020, 85 L.Ed. 1477 (1941); American Guarantee Liability Ins. Co. v. U.S. Fidelity & Guaranty Co., 668 F.3d 991, 996 (8th Cir.2012). But a court need not undertake a choice-of-law inquiry unless an actual conflict of law is demonstrated. Prudential Ins. Co. of Am. v. Kamrath, 475 F.3d 920, 924 (8th Cir.2007) (citation omitted). Because the parties do not raise any actual conflict and because they do not dispute that Missouri law applies, the Court applies Missouri law.3

3 Plaintiff Great American contends no choice of law analysis is necessary because the outcome is the same under the law of the three states that could potentially apply: Missouri, Tennessee, and Alabama. Because Defendants Windermere, Brown, and the Richards contend Missouri law should apply, the Court concludes that the parties agree to the application of Missouri law.

A. Interpretation of Insurance Policies in Missouri

The interpretation [*12] of an insurance policy is a question of law to be determined by the Court. Mendota Ins. Co. v. Lawson, 456 S.W.3d 898, 903 (Mo. Ct. App. 2015). The ultimate goal of contract interpretation is to determine the intent of the parties. Bolinger v. Clarks Mut. Ins. Co., 485 S.W.3d 803, 809 (Mo. Ct. App. 2016). To determine the intent of the parties, the language in the contract is to be read according to its plain and ordinary meaning. Mendota, 456 S.W.3d at 903.

In interpreting an insurance policy, “[t]he key is whether the contract language is ambiguous or unambiguous.” Todd v. Mo. United Sch. Ins. Council, 223 S.W.3d 156, 160 (Mo. banc 2007). If an ambiguity exists, the policy language will be construed against the insurer. Mendota, 456 S.W.3d at 904. “‘An ambiguity exists when there is duplicity, indistinctness, or uncertainty in the meaning of the language of the policy.'” Fanning v. Progressive Northwestern Ins. Co., 412 S.W.3d 360, 364 (Mo. Ct. App. 2013) (quoting Seeck v. Geico Gen. Ins. Co., 212 S.W.3d 129, 132 (Mo. banc 2007)). “‘To test whether the language used in the policy is ambiguous, the language is considered in the light in which it would normally be understood by the lay person who bought and paid for the policy.'” Blumer v. Automobile Club Inter–Ins, 340 S.W.3d 214, 219 (Mo. Ct. App. 2011) (quoting Heringer v. Am. Family Mut. Ins. Co., 140 S.W.3d 100, 102 (Mo. Ct. App. 2004)). “Whether an insurance policy is ambiguous is a question of law.” Todd, 223 S.W.3d at 160.

“[T]he parties seeking to establish coverage under the insurance policy have the burden of proving that the claim is within the coverage afforded by the policy . . . even though they are denominated as defendants in a declaratory judgment action.” State Farm Fire & Cas. Co. v. D.T.S., 867 S.W.2d 642 (Mo. Ct. App. 1993).

B. Liability Coverage [*13] for Windermere as Additional Insured

The Great American policy’s declarations page lists Student Life as the named insured. Windermere is listed as an additional Insured as follows:

5. AUTOMATIC ADDITIONAL INSURED(S)

a. Additional Insured — Manager or Lessor of Premises

(1) This policy is amended to include as an insured any person or organization (hereinafter called Additional Insured) from whom you lease or rent property and which requires you to add such person or organization as an Additional Insured

***

(2) With respect to the insurance afforded the Additional Insured identified in Paragraph A.(1) of this endorsement, the following additional provisions apply:

(a) This insurance applies only to liability arising out of the ownership, maintenance or use of that portion of the premises leased to [Student Life].

[Doc. 35-17, p. 1 (“Endorsement”)]

Great American contends that the reference in Section 5.a.(2)(a) to “premises leased to you” refers to the specific places identified in the Amended Conference Contract between Windermere and Student Life. According to Great American, because the Edge is not listed, Windermere’s potential liability for the accident at the Edge is not covered. In contrast, Windermere [*14] argues that “premises lease” includes all the places on its property that Student Life campers were authorized to access, including the Edge.

1. Interpretation of Section 5.a.(2)(a)4

4 Defendants Brown and the Richards argue that the limitation of liability in Section 5.a.(2)(a) does not apply to Windermere because that section refers to Paragraph A.(1), and Windermere is identified as an Additional Insured by Paragraph a.(1). In other words, these Defendants reason that the parties must be referring to something other than the preceding paragraph a.(1) because capital A.(1) rather than lower case a.(1) was used. Defendants further reason that the only “Paragraph A.(1)” in the endorsement is located in Section 7A.(1) which limits liability to $300,000 for personal property and building damage rented to an additional insured. The Court rejects this argument because the reference to “A” instead of “a” is clearly a minor typographical error, and the Defendants’ strained interpretation of Section 7 in this context makes no sense. In Mendota Insurance Company v. Ware, 348 S.W.3d 68 (Mo. Ct. App. 2011), the Missouri Court of Appeals rejected a similar argument based on a typographical error because the “policy’s intended meaning, would be apparent to an ordinary reader.” Id. at 73. In the context of the Great American policy, it would not be reasonable for an ordinary reader to think that the use of A.(1), immediately after a section labeled a.(1), would be referring to 7A.(1) when 7A.(1) has nothing to do with identifying an additional insured and is not located in close proximity to the paragraph that does deal with the additional insured.

Whether an insurance provision is ambiguous is a question of law for the Court. General Am. Life Ins. Co. v. Barrett, 847 S.W.2d 125, 131 (Mo. Ct. App. 1993). A policy is ambiguous if it is “fairly open to different interpretations” because it contains “duplicity, indistinctness, or uncertainty of meaning.” Id. Importantly, there are two types of ambiguities in the law: patent and latent. Cent. United Life Ins. Co. v. Huff, 358 S.W.3d 88, 95 (Mo. Ct. App. 2011). “A patent ambiguity is detected from the face of the document, whereas a latent ambiguity is found ‘when the particular words of a document apply equally well to two different objects or some external circumstances make their meaning uncertain.'” Id. (quoting Jake C. Byers, Inc. v. J.B.C. Invs., 834 S.W.2d 806, 816 (Mo. Ct. App. 1992)).

a. Patent Ambiguity

The key phrase that this Court must interpret and apply is “portion of the premises leased to [Student Life].” “The words of a policy must be given their plain and ordinary meaning consistent with the reasonable expectation and objectives of the parties, unless it is obvious that a technical meaning was intended.” Bolinger v. Clarks Mut. Ins. Co., 485 S.W.3d 803, 809 (Mo. Ct. App. 2016). (internal quotation marks removed). Counsel for Great American argues that the term “lease” is understood by everyone [*15] to be a premise over which one has exclusive or near exclusive control. [Oral Argument Transcript, p. 3]. Therefore, the word “lease” would only cover the property over which Student Life had exclusive control by the terms of the Amended Conference Contract. In contrast, Windermere effectively argues that all of the documents surrounding the formation of the insurance policy demonstrate that an ordinary person would not intend the technical meaning of the term “lease,” i.e. exclusive possession, but instead, would expect it to cover all of the Windermere property to which Student Life campers had authorized access.

Under Missouri law, a lease gives exclusive5 use of property for a determined period of time to the lessee. Chubb Group of Ins. Cos. v. C.F. Murphy & Associates, Inc., 656 S.W.2d 766, 777 (Mo. Ct. App. 1983). The term “lease” gives rise to a landlord-tenant relationship, whereby the tenant has “exclusive possession of the premises as against all the world,” including the landlord. Santa Fe Trail Neighborhood Redevelopment Corp. v. W.F. Coen & Co., 154 S.W.3d 432, 439 (Mo. Ct. App. 2005) (internal quotation marks and citations removed). In contrast, “[a] license is only a privilege to enter certain premises for a specific purpose. Kimack v. Adams, 930 S.W.2d 505, 507 (Mo. Ct. App. 1996). The difference between a lease and a license is technical and difficult to determine. Santa Fe, 154 S.W.3d at 439.

5 Great American did not cite to a case that says “near exclusive” possession is enough, and the Court has found no such statement in Missouri law.

When there is a conflict between the technical definition [*16] of a term in a policy and what a reasonable person would understand, the lay definition controls unless it is obvious that a technical definition was intended. Mansion Hills Condo. Ass’n v. Am. Fam. Mut. Ins. Co., 62 S.W.3d 633, 638 (Mo. Ct. App. 2001). “To determine the [lay definition] of a term, courts will consult standard English language dictionaries.” Id. Merriam Webster’s New College Dictionary defines “leased” as “property occupied or used under the terms of a lease.” Webster’s II New College Dictionary (1995). “Lease” is defined as “a contract granting occupation or use of property during a certain period in exchange for a specified rent.” Id. “Premises” is defined as “land and the buildings on it.” Id. Those definitions do not indicate possession is exclusive.

In this context, did the parties intend the phrase “premises leased to you” to have a technical meaning–i.e. the formation of a landlord-tenant relationship between Windermere and Student Life whereby Student Life would have exclusive control over the property listed in the Amended Conference Contract, even as to Windermere? The Certificate of Insurance6 suggests otherwise. [Doc. 35-7]. It states:

Event: Student Life Event Dates: May 31-June 7 and June 14-20, 2014 Windermere Conference Center is included as [*17] Additional Insured on the General Liability policy, as per endorsement #CG 82 24, ed. 12/01, and on the Automobile Liability policy, as per endorsement #CA 8518, ed. 6/09.

This language does not suggest that the parties intended a landlord-tenant relationship being created between Student Life and Windermere. Rather, it suggests that Great American knew it was providing liability insurance to Windermere for an event — the camp — being held by Student Life on the Windermere campus. At a minimum, there is a conflict between the technical meaning of the word lease and what an ordinary person would understand under these circumstances, taking into account the dictionary definitions. In those circumstances, the technical definition does not control. See Mansion Hills Condo. Ass’n v. Am. Fam. Mut. Ins. Co., 62 S.W.3d 633, 638 (Mo. Ct. App. 2001).

6 Because the Certificate of Liability was issued to Windermere for the purpose of adding Windermere as an additional insured, “as per endorsement #CG 82 24 ed. 12/01,” the Certificate arguably became a part of the insurance contract. See Corder v. Morgan Roofing Co., 355 Mo. 127, 195 S.W.2d 441 (Mo. 1946) (finding certificate of insurance that doubled liability coverage, added insurance for property damage, and certified complete coverage of all operations in connection with the insured’s construction contract was part of the insurance contract); see also, Section 1.5.a.(1) of this endorsement:

This policy is amended to include as an insured any person or organization (hereinafter called Additional Insured) from whom you lease or rent property and which requires you to add such person or organization as an Additional Insured on this policy.

Further, State ex rel. State Highway Commission v. Johnson, 592 S.W.2d 854, 857-8 (Mo. Ct. App. 1979), says that a court may consider the circumstances under which the contract was made. These circumstances, as discussed below in the section on latent ambiguity, also support [*18] a finding that an ordinary person would expect to be covered for camp activities, not just for dorm rooms and conference space.

For these reasons, a patent ambiguity exists. The disputed phrase not only should be interpreted in favor of the Defendants, but the Defendants’ interpretation is arguably the only one that would make sense to an ordinary person under these circumstances.

b. Latent Ambiguity

Even if there were no patent ambiguity, the Court can look at extrinsic evidence to determine if there is a latent ambiguity.7 Royal Banks of Mo. v. Fridkin, 819 S.W.2d 359, 362 (Mo. banc 1991) (“A latent ambiguity . . . must be developed by extrinsic evidence.”).

7 Although Defendants do not use the term latent ambiguity, this appears to be the crux of Defendants’ argument: that even if the “premises leased” term is not ambiguous on its face, it is ambiguous when applied to the facts at hand.

A latent ambiguity exists when a contract “on its face appears clear and unambiguous, but some collateral matter makes the meaning uncertain.” Id. In other words, an ambiguity is “latent if language, which is plain on its face, becomes uncertain upon application.” Gen. Am. Life Ins. Co. v. Barrett, 847 S.W.2d 125, 131 (Mo. Ct. App. 1993). For example, “[a] latent ambiguity may be one in which the description of the property is clear upon the face of the instrument, but it turns out that there is more than one estate to which the description applies; or it may be one where the property is imperfectly or in some respects erroneously described, so as not to refer with precision [*19] to any particular object.” Muilenburg, Inc. v. Cherokee Rose Design & Build, LLC, 250 S.W.3d 848, 854-55 (Mo. Ct. App. 2008) (quoting Prestigiacamo v. Am. Equitable Assur. Co. of N.Y., 240 Mo. App. 839, 221 S.W.2d 217, 221 (1949) (internal quotation marks omitted)). The case of Royal Banks of Mo. v. Fridkin, 819 S.W.2d 359, 362 (Mo. banc 1991) provides another example. In Royal Banks, the Missouri Supreme Court found a latent ambiguity in an otherwise unambiguous contract where the contract described a $10,000.00 promissory note but where no $10,000.00 promissory note actually existed. Id. Looking to extrinsic evidence, the court concluded, “Evidence of a promissory note that fits the description in the guaranty in all respects except for principal amount, coupled with the fact that a $10,000.00 note did not exist, is a collateral matter that renders the meaning of the guaranty uncertain. Once it became apparent that there was no $10,000.00 note but instead only a $50,000.00 note, a latent ambiguity existed.” Id.

Although parol evidence may not ordinarily be considered to create an ambiguity, the Court may consider such evidence to demonstrate the existence of collateral matters that create a latent ambiguity. Royal Banks of Mo. v. Fridkin, 819 S.W.2d 359, 362 (Mo. banc. 1991) (“A latent ambiguity is not apparent on the face of the writing and therefore, must be developed by extrinsic evidence.”). Therefore, the Court may consider extrinsic evidence to determine if a latent ambiguity exists. In this case, [*20] in the absence of a definition of “premises leased,” the surrounding facts suggest a latent ambiguity about what was intended by this term.

The plain language of the Amended Conference Contract alludes to Student Life’s use of and access to many more properties than merely conference space and lodging units during its event. For example, the Contract’s plain language contemplates Student Life’s use of a dining hall8 because the meals they contracted for were to be served there. Yet, the Contract does not specifically list the dining hall. Likewise, the Contract does not mention the chapel, despite Windermere’s title as Windermere Baptist Conference Center and its practice of contracting with church groups to conduct summer church camps. At a minimum, a jury could find the parties intended that campers would have access to the chapel, even though it was not listed. Finally, the Contract, like the Certificate of Insurance, refers to an “Event,” and Great American’s interpretation of the Contract considers only part of what was going to occur at that event.

8 The Contract’s “Meal Information” section provides start and end times for specific meals and alludes to Student Life’s use of the Dining Hall, stating, “All guests eating in the dining hall must have a meal ticket or wrist band to be admitted into the Dining Hall.” [Doc. 35-5, p. 2].

The Court also considers the parties’ Fax Back Response Sheet. [Doc. 40-4]. This document confirms that the purpose of the parties’ [*21] agreement was to host an event, referred to by the Sheet as “Student Life Camp.” [Doc. 40-4]. In addition, the Sheet shows the parties’ understanding that Student Life’s campers would have access to not only conference and dorm space, but also a church for worship, recreational fields, a gymnasium, hiking trails, a body of water for “waterfront activities,” and as is relevant in this case, The Edge ropes course:

What are some free-time options on your campus?

o Sand Volleyball, Outdoor Basketball, Tennis, Mini Golf, Disc Golf, Pool, Hiking, The Edge (low/high ropes course), Paintball, Waterfront Activities (Inflatable water park, kayak, canoe, paddle boats, fishing, etc) . . .

See generally [Doc. 40-4 and p. 3 (emphasis added)]. Because Student Life was contracting with Windermere for an event–to host a camp complete with various camp activities and facilities–the Court cannot find that a reasonable insured would have intended the term, “premises leased,” to limit its coverage only to liability arising out of conference rooms and lodging units.

There is no dispute that Student Life camper, Karlee Richards, was authorized to access The Edge at the time of her accident. Based on the Fax [*22] Back Response Sheet, alone, which suggests that Student Life would expect to have access to The Edge during its event, a reasonable juror could conclude that The Edge was a “portion of the premises leased,” which would entitle Windermere to coverage as an additional insured for its liability to Richards. Therefore, summary judgment must be denied.9

9 Although Defendants did not file their own motions for summary judgment, Defendants ask the Court to grant summary judgment in their favor, citing Fed. R. Civ. P. 56(f)(1), which provides: “After giving notice and a reasonable time to respond, the court may: (1) grant summary judgment for a nonmovant.” [Doc. 53]. Granting summary judgment for the non-movants under this rule is discretionary. Due to the fact that the focus of this briefing has been on Great American’s request for summary judgment, the Court declines to exercise its discretion under this provision. However, the Court will permit Defendants to file their own motions for summary judgment within 20 days of the date of this Order, not inconsistent with this order as to the issues ruled against them.

In the alternative, it is well-settled that an ambiguity within an insurance policy must be construed against the insurer. Krombach v. Mayflower Ins. Co., Ltd., 827 S.W.2d 208, 210 (Mo. banc 1992). As already discussed, an ambiguity exists as to what the parties intended “premises leased” to refer to. Therefore, construing this ambiguous term against Great American requires the Court to apply the meaning “which would be attached by an ordinary person of average understanding if purchasing insurance.” Id. An ordinary insured could reasonably understand this phrase to refer to the areas to which Student Life had access during its event at Windermere. Therefore, Great American’s Motion for Summary Judgement must be denied on this issue.

Great American’s cited authorities do not require a different outcome. First, the coverage disputes in many of Great American’s authorities center on how to interpret “arising out of,” [*23] without any dispute as to what properties the parties understood to be the “leased premises” covered by the additional insured endorsement at issue. In contrast to the facts before this Court, each of these cases involved an undisputed lease contract between a landlord and tenant, rather than an event contract between two organizations, and there was no dispute or ambiguity surrounding what property was meant by the “premises leased” or a similar term. See, e.g., Belz Park Place v. P.F. Chang’s China Bistro, Inc., 2015 WL 11145058 (W.D. Tenn. Mar. 23, 2015) (within context of landlord-tenant relationship, involving a lease contract, and no dispute about the leased premises); Liberty Mut. Ins. Co. v. Michigan Mut. Ins. Co., 891 N.E.2d 99 (Ind. Ct. App. 2008) (same); Northbrook Ins. Co. v. American States Ins. Co., 495 N.W.2d 450 (Minn. Ct. App. 1993) (same); Hilton Hotels Corp v. Employers Ins. of Wausau, 629 So.2d 1064 (Fla. Dist. Ct. App. 1994) (same); SFH, Inc. v. Millard Refrigerated Svcs., Inc., 339 F.3d 738 (8th Cir. 2003) (same).

For example, in U.S. Fidelity & Guar. v. Drazic, 877 S.W.2d 140 (Mo. Ct. App. 1994). the Missouri Court of Appeals considered additional insured coverage within the context of a landlord-tenant relationship and an unambiguous lease contract. The Drazics leased a portion of their basement to the Brewers, and the Drazics were named as additional insureds under the Brewers’ liability insurance policy. Id. at 141. After the Brewers’ employee fell in a parking lot near the Drazics’ building and injured herself, she filed suit alleging that the Drazics negligently discharged steam from their dry cleaning business, which formed ice on the parking area [*24] causing her fall. Id. at 141-42. The policy’s additional insured endorsement provided coverage to the Drazics as additional insureds “but only with respect to liability arising out of the ownership, maintenance or use of that part of the premises designated below leased to the named insured.” Id. at 142-43 (emphasis added). The court considered the parties’ lease contract, which identified the premises leased as a “designated portion of a commercial building known and numbered as 418 Manchester Road, Ballwin, Missouri 63011, plus the area adjacent to the entrance of Brewer’s Quilt Shop for installation of their office.” Id. at 142. The court reasoned that the endorsement’s “plain language contemplated coverage for the Drazics as additional insureds for liability arising out of incidents taking place in that part of the building leased to the Brewers pursuant to the lease contract” and that there was no coverage because the accident at issue “took place on a parking area outside the building.” Id. at 143.

In contrast to Drazic, the Great American policy does not limit coverage to the “premises designated below” accompanied by a lease that specifically identifies an address or description of the area unambiguously covered by this [*25] clause. Also unlike the facts before this Court, there is no dispute or uncertainty in Drazic about what is meant by the “premises [leased].”

In addition, the Court rejects Great American’s reliance on Drazic for the separate proposition that “the purpose of additional insured endorsements obtained in a landlord-tenant context is to provide landlords protection from vicarious liability due to a tenant‘s action which takes place on the premises that the tenant has leased.” [Doc. 35, p. 16 (quoting Drazic, 877 S.W.2d at 143)]. Despite articulating this theory, the Drazic court did not resolve the coverage question based on vicarious liability: “The injury to Leary occurred due to alleged negligence on the part of the landlords’ business . . . and it did not occur on the premises leased to the [tenants].” Drazic, 877 S.W.2d at 143 (emphasis added). Furthermore, to the extent Great American contends that additional insured coverage is limited to acts for which Windermere is vicariously liable, the Court disagrees. The case from which this theory originated involved an insurance contract materially different from the one at issue here because the policy language in that case specifically limited coverage for additional insureds “against [*26] vicarious liability for the acts of the named insured.” See Hormel Foods Corp. v. Northbrook Property and Cas. Ins. Co., 938 F. Supp. 555, 558-560 (D. Minn. 1996) (quoting Harbor Ins. Co. v. Lewis, 562 F. Supp. 800, 802 (E.D. Pa. 1983) and explaining the origins and inapplicability of this theory). In contrast, coverage under the Great American policy cannot be said to turn on “vicarious liability” because the policy provision does not use this language.

As for other cases cited by Great American, these cases are distinguishable because they involve starkly different contract language than the term, “premises leased,” which this Court has found to be ambiguous. See, e.g., Lancaster v. Ferrell Paving, Inc., 397 S.W.3d 606 (Tenn. Ct. App. 2012) (involving different endorsement language: “liability arising out of your ongoing operations performed for the [additional] insured”) (emphasis added). Finally, Great American’s reliance on contract cases outside of the insurance context is misplaced because these cases also interpret contract provisions that are unlike the policy language at issue here. See, e.g., Once Upon a Time, LLC v. Chappelle Properties, LLC, 209 So. 3d 1094, 2016 WL 3031347 (Ala. 2016) (applying Alabama law to an indemnity agreement that did not contain the language “arising out of” or “premises leased” and did not involve insurance policy); Union Realty Co., Ltd. v. Family Dollar Stores of Tennessee, Inc., 255 S.W.3d 586 (Tenn. Ct. App. 2008) (interpreting contract language regarding the landlord’s and tenant’s obligations to procure insurance but no interpretation of insurance policy language at [*27] issue); Pilla v. Tom-Boy, Inc., 756 S.W.2d 638 (Mo. Ct. App. 1988) (interpreting indemnity provision in a lease that did not contain the language “arising out of” outside of insurance context and no dispute surrounding what constituted the leased premises).

Finally, the Court rejects Great American’s separate argument that whether a tenant has “shared” versus “exclusive” use of an area controls whether that area is part of the “premises leased” covered by an insurance endorsement. For example, in Colony Ins. Co. v. Pinewoods Enterprises, Inc., 29 F. Supp. 2d 1079 (E.D. Mo. 1998), a district court found insurance coverage for liability arising out of an area shared between the additional insured and other parties. In Colony, Bledsoe and Pinewoods entered a leasing contract in which Bledsoe (the lessee) leased portions of Pinewood’s campgrounds for a concert. Id. at 1081. Pinewoods was named as an additional insured under Bledsoe’s general liability policy with Colony Insurance. Id. During the concert, a rain storm caused many of the concert goers to take shelter on and under a deck attached to a lodge at the campground. Id. The lodge’s deck collapsed, injuring numerous concertgoers. Id. At issue was whether Colony Insurance’s coverage of Pinewoods as an additional insured extended to this accident. Id.

The court considered both the insurance [*28] policy endorsement and the parties’ lease contract. The endorsement provided additional insured coverage “but only with respect to liability arising out of your [Bledsoe’s] operations or premises owned by or rented to you.” Id. at 1082. The leasing contract specifically provided that Bledsoe “shall have the exclusive use of the Pinewoods Park” for a specific time period with the exception of the Lodge area. Id. at 1081-82. The contract also provided:

(5) LESSEE [Bledsoe], its customers, guests and invitees will share the Lodge area and facilities, i.e. store, gift shop, bait and tackle area . . . with the fishermen and permanent guests and any campers reserved prior to June 10, 1995.

Id. at 1082. The court concluded that Bledsoe leased the lodge area because the contract “specifically (albeit not exclusively) lease[d] the lodge area to Bledsoe,” and the endorsement provided that coverage extended to “the premises owned by or rented to you.” Id. at 1083 (emphasis added). The court concluded that “Colony’s additional insured endorsement extend[ed] coverage to Pinewoods for any liability arising out of the collapse of the lodge’s deck because the lodge was part of the premises leased to Bledsoe.” Id. In contrast to Great American’s contention that exclusivity [*29] is required, the Colony court still found the lodge premises to be “rented to” Bledsoe for purposes of additional insured coverage, despite the fact that the parties’ lease agreement provided that Bledsoe would “share” the lodge area premises at issue “with the fishermen and permanent guests and any campers.” Id. (emphasis added).

C. Liability Coverage for Kendra Brown or Other Windermere Employees

Great American also moves for summary judgment on the issue of coverage for Kendra Brown, Windermere’s employee. Great American argues that no coverage exists for Brown or any other Windermere employee because the Additional Insured Endorsement does not provide additional insured status and/or coverage for an additional insured’s employees. Brown is not identified anywhere in Student Life’s Great American policy nor is she listed as an Additional Insured on a Certificate of Liability. Therefore, any coverage for Brown would necessarily derive from her status as Windermere’s employee, and employees are not covered as insureds by the Additional Insured Endorsement.

Brown does not dispute that the Additional Insured Endorsement fails to provide coverage for an additional insured’s employees. Instead, [*30] Brown argues that Windermere should be considered a “Named Insured,” which in turn, makes the provisions applicable to “Named Insureds” also applicable to Windermere, including the provision that expands coverage for “Named Insureds” to their employees. The Court rejects this argument as based on an unreasonable interpretation of the policy.

Brown contends that the policy does not define “Named Insured,” and thus, it must be given the meaning that would be attached by an ordinary person. Brown reasons that an ordinary person would define “Named Insured” as a person or entity that is actually named as an insured. In turn, Brown says, because the Certificate of Liability names Windermere as an additional insured, Windermere must be a “Named Insured.” Brown next points to the following provision:

Throughout this Policy the words “you” and “your” refer to the Named Insured shown in the Declarations, and any other person or organization qualifying as a named insured under this Policy.

The word “insured” means any person or organization qualifying as such under

SECTION II — WHO IS AN INSURED.

***

[Doc. 42-2, p. 65 of 166 (“CGL Policy”)]. Brown contends that because she has established that Windermere [*31] is a “Named Insured,” “you” and “your” throughout the policy must also refer to Windermere. Next, Brown points to Section II of the policy:

SECTION II — WHO IS AN INSURED

2. Each of the following is also an Insured:

a. Your . . . “employees,” . . . but only for acts within the scope of their employment by you or while performing duties related to the conduct of your business.

[Doc. 42-2, p. 65 of 166 (“CGL Policy”)]. Brown argues that if the Court accepts her contention as true that Windermere is a “Named Insured,” then “your” refers to Windermere, which means that Brown “is also an Insured” as “[y]our [Windermere’s] ’employee,'” according to Section II.2.a.

Brown’s argument fails because it is based on an unreasonable interpretation that Windermere is somehow a “Named Insured,” a status unsupported by the policy’s clear language.10 First, the policy distinguishes between mere “insureds” and those insureds that are “Named Insureds.” Compare “The word ‘insured’ means any person or organization qualifying as such under SECTION II — WHO IS AN INSURED” with “Throughout this Policy the words ‘you’ and ‘your’ refer to the Named Insured shown in the Declarations, and any other person or organization qualifying [*32] as a named insured under this Policy.” [Doc. 42-2, p. 65 of 166 (“CGL Policy”)]. The fact that the policy differentiates between the two statuses shows that they are different terms, despite Brown’s contention that all insureds named are “Named Insureds.”

10 Furthermore, even if the Court accepted Brown’s contention that Windermere, an Additional Insured, was in fact, a Named Insured, Brown still has not shown that she is entitled to coverage under the policy as a Windermere employee because she has not alleged any facts or argument that her liability to Richards arose from “acts within the scope of [her] employment . . . or while performing duties related to the conduct of [Windermere’s] business.” Section II.(2).a.; [Doc. 42-2, p. 65 of 166 (“CGL Policy”)].

Furthermore, the policy’s plain language identifies which insureds are “Named Insureds.” First, the top of the policy’s Declarations page states:

NAMED INSURED LIFEWAY CHRISTIAN RESOURCES OF THE SOUTHERN BAPTIST CONVENTION

[Doc. 42-2, p. 29 of 166]. Therefore, because Student Life is “shown in the Declarations,” it is a “Named Insured.” The policy also includes a Named Insured Endorsement, which amends the Declarations by providing, “It is agreed that the Named Insured shown in the Declarations is amended to read as follows.” [Doc. 42-2, p. 41 of 166]. This statement is followed by a list of various organizations’ names related to Lifeway, which the endorsement provides are also included as Named Insureds. Id. Accordingly, it is reasonable to conclude that these organizations constitute “any other . . . organization qualifying as a named insured under this Policy” and therefore are also “Named Insureds.” [Doc. 42-2, p. 65 of 166 (“CGL [*33] Policy”)]. Based on the policy’s plain language, an ordinary person would understand “Named Insured” to refer to those insureds identified on the Declarations Page next to “NAMED INSURED” and those insureds identified in the Named Insured Endorsement. To interpret the policy to mean that anyone named as an insured, including those named as Additional Insureds, were also entitled to the same expansive level of coverage as the “Named Insureds” would be unreasonable.

In contrast to those entities that are clearly designated as “Named Insureds,” Windermere is not listed as a Named Insured on either the Declarations page or on the endorsement adding Named Insureds to the Declarations page. Instead, the policy’s only reference to Windermere is located in the Certificate of Liability it was issued prior to Student Life’s 2014 camp, which included it as an “Additional Insured,” providing:

Windermere Conference Center is included as Additional Insured on the General Liability policy, as per endorsement #CG 82 24, ed. 12/01, and on the Automobile Liability policy, as per endorsement #CA 8518, ed. 6/09.

[Doc. 35-7 (“Certificate of Liability Insurance”) (emphasis added)]. The Additional Insured Endorsement [*34] provides that it “is added to SECTION II — WHO IS AN INSURED, 5. AUTOMATIC ADDITIONAL INSURED(S).” [Doc. 35-17, p.1 (“Endorsement”).] Had Great American intended to make Windermere a “Named Insured,” it could have identified it as a “Named Insured” within the Certificate of Liability, or it could have provided that Windermere be added to the Named Insured Endorsement, rather than merely “Section II — Who is an Insured.” It did neither. For these reasons, an ordinary person would understand Windermere to be an “insured,” not a “Named Insured,” and thus, the words “you” and “your” throughout the policy do not refer to Windermere. Accordingly, the provision that expands coverage for “Named Insureds” to cover their employees as insureds does not apply to Windermere. Because Brown is not an insured under the policy and therefore not entitled to coverage, summary judgment is granted in favor of Great American on this point.

D. Duty to Defend

Great American also contends that it owes no duty to defend Windermere or Brown and it should be granted summary judgment on this claim. Under Missouri law, the duty to defend “arises whenever there is a potential or possible liability to pay based on [*35] the facts at the outset of the case and is not dependent on the probable liability to pay based on the facts ascertained through trial.” Columbia Cas. Co. v. HIAR Holding, L.L.C., 411 S.W.3d 258, 265 n.10 (Mo. 2013) (internal quotation marks removed). Because the Court has already found that Brown and other Windermere employees are not insureds under Great American’s policy and thus, not entitled to coverage, it follows that Great American has no duty to defend Brown.11

11 This rationale was also articulated in Great American’s denial letter, which provided:

First, as to Kendra Brown, she is not listed as an additional insured on the Certificate of Liability Insurance, nor is there any indication on the [Certificate] that additional insured status is to be afforded to employees of Windermere. Finally, there is nothing in the specific form referenced on the Certificate . . . nor anywhere else in the Lifeway Policy, that affords additional insured status to Kendra Brown or any other Windermere employee. . . . Kendra Brown is simply not an additional insured under the Lifeway Policy such that Great American is denying the tender made on behalf of Kendra Brown.

[Doc. 35-18, p. 5-6 of 12 (“Feb. 4, 2016 Denial Letter”)].

As to whether Great American owes a duty to defend Windermere, the Endorsement makes clear that any coverage for Windermere as an additional insured would be excess, and the policy does not afford [*36] a defense when (1) its coverage is excess and (2) when the insured is being provided a defense by another carrier.12 Under Missouri law, “‘an insurer’s duty to defend is purely contractual.'” Markel Am. Ins. Co. v. Unnerstall, 2009 U.S. Dist. LEXIS 3430, 2009 WL 57451 at *4 (E.D. Mo. 2009) (quoting Crown Ctr. Redevelopment Corp. v. Occidental Fire, 716 S.W.2d 348 (Mo. Ct. App. 1986)). “If there is no contract to defend, there is no duty to defend.” Id. In relevant part, the Endorsement provides:

5. AUTOMATIC ADDITIONAL INSURED(S)

a. Additional Insured — Manager or Lessor of Premises

***

(2) With respect to the insurance afforded the Additional Insured identified in Paragraph A.(1) of this endorsement, the following additional provisions apply:

***

(d) Coverage provided herein is excess over any other valid and collectible insurance available to the Additional Insured whether the other insurance is primary, excess, contingent or on any other basis unless a written contractual arrangement specifically requires this insurance to be primary.

12 This rationale was also articulated in Great American’s denial letter, which provided:

[E]ven if indemnity coverage did exist for Windermere and Kendra Brown under the Lifeway Policy, it is also clear that that [sic] Great American owes no defense obligation of the pending lawsuit. Your December 17, 2015 correspondence renewing the tender of defense on behalf of both Windermere and Kendra Brown makes clear that Windermere is being [*37] afforded a defense by Church Mutual and that Kendra Brown is being defended by both Church Mutual and Shelter. . . . [T]he Social Service Agency General Liability Broadening Endorsement makes clear that any coverage that did exist would be excess over all other insurance, including both the Church Mutual and Shelter policies. The “Other Insurance” provision of the Lifeway Policy makes clear that, where its coverage is excess and a defense is being provided by another carrier, Great American owes no duty to defend. Hence, Windermere’s and Kendra Brown’s tender of the defense of the pending lawsuit is denied for this additional reason.

[Doc. 35-18, p. 6 (“Feb. 4, 2016 Denial Letter”)].

The Additional Insured Endorsement’s Section 5.a.(2)(d) is clear that any coverage afforded is “excess over any other valid and collectible insurance,” regardless of the priority of coverage of the insurance–be it “primary, excess, [or] contingent.” In this case, Church Mutual had already tendered, or attempted to tender its policy limits on Windermere’s behalf in the underlying lawsuit. Therefore, although Windermere is entitled to coverage under the Great American policy, this coverage is excess.

The Other Insurance provision then states that where coverage is excess [*38] and the insured is being provided a defense by another carrier, Great American has no defense obligation. [Doc. 42-2, p. 66-68 of 166 (“CGL Policy”)]. Specifically, this provision provides:

SECTION IV — COMMERCIAL GENERAL LIABILITY CONDITIONS

***

4. Other Insurance

***

(2) When this insurance is excess we will have no duty under Coverages A or B to defend the Insured against any “suit” if any other insurer has a duty to defend the Insured against the “suit.” . . .

Windermere is currently being defended by its own insurance carrier, Church Mutual. Because the policy is clear that there is no defense obligation where coverage is excess and a defense is being provided by another carrier, which is the case here, the Court rejects Windermere’s contention that it is entitled to a defense based on a potential for coverage. Therefore, summary judgment is granted for Great American on its duty to defend.

E. Medical Payments Coverage

Finally, Great American moves for summary judgment as to the Medical Payments coverage for Richards’s medical expenses. In its November 17, 2015 letter to Great American, Windermere demanded the Coverage C Medical Payments limits for Richards. The provision governing Medical [*39] Payments provides in relevant part:

COMMERCIAL GENERAL LIABILITY COVERAGE FORM

***

Coverage C — Medical Payments

1. Insuring Agreement

a. We will pay medical expenses as described below for “bodily injury” caused by an accident:

***

provided that:

***

(b) the expenses are incurred and reported to us within one year of the date of the accident; and

***

[Doc. 42-2, p. 62 of 166 (“CGL Policy”)].

Great American argues that it is entitled to summary judgment as to this coverage because medical expenses were not reported to Great American within the time limit provided in Paragraph 1.a.(b). This provision provides that Great American will pay medical expenses for bodily injury “provided that . . . (b) the expenses are incurred and reported to us within one year of the date of the accident.” Section 1.a.(b) (emphasis added).

Richards’s accident occurred on June 4, 2014. Neither she nor anyone on her behalf made claim for Medical Payments coverage until Windermere’s November 17, 2015 demand letter more than one year after the date of the accident. Therefore, Great American is entitled to summary judgment as to the Medical Payments coverage.

III. Conclusion

For the reasons set forth above, Plaintiff Great American Alliance [*40] Insurance Company’s motion for summary judgment is granted in part and denied in part. [Doc. 34]. Summary judgment is granted on Great American’s liability coverage for Kendra Brown, individually, as an additional insured; Great American’s duty to defend Kendra Brown and Windermere; and Great American’s Medical Payments coverage for Karlee Richards’s injuries. Summary judgment is denied on Great American’s coverage for Windermere as an additional insured. It is further ordered that on or before July 25, 2017, Defendants may file any motions for summary judgment not inconsistent with this order as to the issues ruled against them.

/s/ Nanette K. Laughrey

NANETTE K. LAUGHREY

United States District Judge

Dated: July 5, 2017

Jefferson City, Missouri


What happens if you fail to follow the requirements of your insurance policy and do not get a release signed? In New Hampshire, you have no coverage.

You either have to create an absolutely fool proof system or take your release
online. If they don’t sign they don’t climb!

Colony Insurance Company v. Dover Indoor Climbing Gym & a., 158 N.H. 628; 974 A.2d
399; 2009 N.H. LEXIS 51

State: New Hampshire, Supreme Court of New Hampshire

Plaintiff: Colony Insurance Company

Defendant: Dover Indoor Climbing Gym& a.

Plaintiff Claims: There was no insurance coverage because the insured did not get a release signed by the injured claimant

Defendant Defenses: The insurance policy endorsement requiring a release to be signed was ambiguous

Holding: For the Plaintiff Insurance Company

Year: 2009

This is a scary case, yet the outcome is correct. The plaintiff insurance company issued a policy to the defendant climbing gym. An endorsement (an added amendment to the contract) to the policy said there would only be coverage if the gym all customers sign a release.

 An endorsement to the policy stated: “All ‘participants’ shall be required to sign a waiver or release of liability in
your favor prior to engaging in any ‘climbing activity.’ “It further stated: “Failure to conform to this warranty will render this policy null and void as [sic] those claims brought against you.”

A climber came to the gym with a group of friends. The gym asked everyone if they had a release on file, and no one said no. (Yes really stupid procedures!) Bigelow was part of the group and did not have a release on file and had not signed a release. While climbing Bigelow fell and was injured.

Bigelow accompanied friends to the climbing gym, but did not sign a waiver. He testified that he was never asked to sign a waiver; the gym owner’s affidavit stated that the owner asked the group of climbers if they had waivers on file and received no negative answers. It is undisputed; however, that Bigelow did not sign a waiver or release. While climbing, Bigelow fell and sustained serious injuries.

The defendant climbing gym put the plaintiff insurance company on notice of the claim. When the insurance company found out no release was signed, the insurance company filed a declaratory judgment motion. A declaratory judgment is a way to go into a court and say there is no coverage under this policy because there was no release. It is an attempt to be a quick interpretation of the contract so the bigger issue can be resolved quickly.

The gym then put Colony on notice to defend and pay any verdict obtained by Bigelow. In response, Colony filed a petition for declaratory judgment, arguing that the gym’s failure to obtain a release from Bigelow absolved Colony of any duty to defend or indemnify the gym.

Both parties filed motions for summary judgment. The trial court granted the climbing gym’s motion for summary judgment saying the endorsement requiring the signed release was ambiguous. The ambiguity was created because the insurance company had not provided the gym with a sample waiver to use.

The trial court found that Colony’s failure to provide the gym with a sample waiver rendered the endorsement provision ambiguous. The trial court therefore denied Colony’s motion for summary judgment, and granted the defendants’ cross-motion for summary judgment. 

This analysis by the court was absurd. Releases need to be written for the gym, for the gym’s clients and for the state law of the state where it is to be used. A “sample” release is a guaranteed loser in most cases. However, I suspect the court was looking for anyway it could find to provide coverage for the gym.

The trial court’s ruling meant the plaintiff insurance company had to provide coverage to the defendant for any claims made by the injured climber Bigelow.

The insurance company appealed the decision. New Hampshire does not have an intermediary appellate court system so the appeal went to the New Hampshire Supreme Court.

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

Insurance policies are contracts and are interpreted as such. However, because have been written in a specific way and are always offered on a take it or leave it basis, as well as the fact the insurance company has all the cards (money) insurance policies have additional legal interpretations in addition to contract law.

The New Hampshire Supreme Court started its analysis by looking at how insurance policies are interpreted. That means the policy is read as a whole objectively. Terms are given their natural meaning, meaning there is no special interpretation of any term, and if the policy is clear and unambiguous is it enforced. No special reading of the policy is allowed based on any party to the policy’s expectations.

We construe the language of an insurance policy as would a reasonable person in the position of the insured based upon a more than casual reading of the policy as a whole. Policy terms are construed objectively, and where the terms of a policy are clear and unambiguous, we accord the language its natural and ordinary meaning. We need not examine the parties’ reasonable expectations of coverage when a policy is clear and unambiguous; absent ambiguity, our search for the parties’ intent is limited to the words of the policy.

The burden of proving that no insurance coverage exists as defined by the policy rests on the insurance company. That means coverage exists under the policy unless the insurance company can prove no coverage was written.

If an insurance company wants to limit its coverage, it is allowed to do so. However, that limitation must be clear and unambiguous. An ambiguity exists if a reasonable disagreement exists between the insurance company and the policyholder and that disagreement could lead to two or more, interpretations.

Although an insurer has a right to contractually limit the extent of its liability, it must do so “through clear and unambiguous policy language. Ambiguity exists if “reasonable disagreement between contracting parties” leads to at least two interpretations of the language. 

Ambiguities will be examined in the appropriate context and the words construed in their plain, ordinary and popular meaning. If the interpretation of the ambiguity favors the policyholder, then the coverage will favor the insured.

In determining whether an ambiguity exists, we will look to the claimed ambiguity, consider it in its appropriate context, and construe the words used according to their plain, ordinary, and popular definitions. If one of the reasonable meanings of the language favors the policyholder, the ambiguity will be construed against the insurer. 

If, however, the language in the policy is clear, the court will not bend over backward or as written in this case “perform amazing feats of linguistic gymnastics” to find an ambiguity and create coverage.

Where, however, the policy language is clear, this court “will not perform amazing feats of linguistic gymnastics to find a purported ambiguity” simply to construe the policy against the insurer and create coverage where it is clear that none was intended. 

The court then looked at the determination of the trial court which found an ambiguity because the insurance company did not provide a sample insurance policy. The Supreme Court found that was an incorrect interpretation of the policy. Even the defendant climbing gym agreed with the court on this
issue.

Even the gym, however, contends that the trial court “reached the correct result for the wrong reasons.” Thus, the gym does not argue that the endorsement creates an ambiguity by its failure to provide the insured with a sample waiver form, but, rather, that the exclusionary language is ambiguous because it states that participants shall “be required” to sign waivers as opposed to mandating that the gym obtain signed waivers.  

The court then applied to the law of New Hampshire in interpreting insurance policies to the facts of this case. The court found the language requiring a release was clear and that a reasonable person could only read it.

The clear meaning of the policy language is that the gym is required to actually obtain waivers from climbing participants. The gym’s interpretation would lead to the absurd result of requiring coverage even if the gym never actually enforced its waiver policy. A reasonable person reading the policy would not understand that coverage existed in such circumstances. The gym’s interpretation is unreasonably narrow, and is therefore not the type of alternative interpretation that renders policy language ambiguous.

Simply put the policy requires the defendant climbing gym to have everyone sign a release. If no release is signed, there was no coverage for the gym. The trial court was overturned, and the climbing gym faced the claims of the injured climber without insurance coverage.

So Now What?

One of the first cases I was involved with was very similar. A Montana stable was insured by an insurance company with an endorsement just as this one; all riders were required to sign a release. In Montana all guides, including horseback guides had to be licensed by the state. A state employee was checking out the
stable and found the releases. In Montana, you cannot use a release. (See States that do not Support the Use of a Release andMontana Statute Prohibits Use of a Release)

The state employee had the stable quit using the release, or they would lose their license to operate in Montana. A rider was injured and sued the stable, and the insurance company denied coverage. I was contacted by the law firm representing the insurance company and was floored by the facts and how the insurance company could deny coverage when it violated state regulations.

However, in that situation as well as this one, there is not much you can do to get around the situation if the policy clearly states you must have a release signed. In the Montana case, the stable owner should have immediately contacted his insurance company when he was told he could not use a release and pay to have the endorsement removed or found another insurance company to write him a policy.

In this case, a proper procedure should have been put in place to confirm signed releases rather than relying on the honesty of someone walking through the doors to the gym.

When you purchase insurance make sure you and your insurance agent are speaking clearly to each other, and you both understand what you are looking for. When the policy arrives, read the policy or pay a professional to read the policy for you looking for the coverage’s you need as well as looking for problems with the coverage.

If you ask the agent or broker to clarify the coverage you are wanting, to make sure you get that clarification in writing (or an email), so you can take that to court if necessary.

Most importantly create a system to make sure that everyone who comes to your facility, activity or business when you use a release, signs a release.

If you are interested in having me write your release, fill out this Information Form and Contract and send it to me.

What do you think? Leave a comment.

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Author: Outdoor Recreation Insurance, Risk Management and Law

Copyright 2017 Recreation Law (720) Edit Law

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By Recreation Law           Rec-law@recreation-law.com     James H. Moss

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