In attempting to recover their defense costs and attorney’s fees based on a rental agreement, they court found the agreement was a contact of adhesion.
State: New Jersey
Plaintiff: Andrea Vladichak
Defendant: Mountain Creek Ski Resort, Inc., and Michael Lavin
Defendant Lavin Claims: indemnity clause is ambiguous
Defendant Defenses: Indemnity Clause is valid
Holding: For the defendant Lavin & against Mountain Creek Ski Resort
The ski area one the lawsuit when brought into a skier v. skier collision lawsuit. Afterwards, they attempted to sue the plaintiff in the skier v. skier case for their costs in defending based on the “indemnification” clause in the rental agreement he signed when the plaintiff rented ski equipment.
The court tore through the release holding for the original plaintiff. The court’s interpretation will not affect this case; however, the interpretation will have a negative bearing on any future case.
On December 21, 2017, plaintiff sustained personal injuries while skiing at a ski area owned and operated by Mountain Creek in Vernon Township, New Jersey. Plaintiff was struck from behind by Lavin, another skier. Plaintiff filed a complaint alleging Mountain Creek and Lavin were negligent. Plaintiff’s complaint alleged Mountain Creek was independently negligent for failing to provide appropriate warnings to skiers, failing to appropriately designate the difficulty of ski trails, failing to provide skiers with appropriate information about trail conditions, failing to timely remove obvious manmade hazards, and/or otherwise failing to establish adequate procedures to provide a safe skiing environment. The complaint alleged Lavin was negligent for breaching his duty to others to ski in a reasonably safe manner by skiing in a reckless manner and/or intentionally colliding into plaintiff and causing her injuries.
Prior to the incident, Lavin signed an equipment rental agreement (Rental Agreement) and lift ticket agreement (Release Agreement) in which he agreed to defend and indemnify Mountain Creek from any claims related to his own conduct and use of the property’s equipment facilities. On August 7, 2019, Mountain Creek filed an answer and cross-claims seeking defense and indemnification from Lavin based on the executed Rental and Release Agreements. Mountain Creek previously tendered the defense to Lavin on July 16, 2019.
The co-defendant Lavin rented skis from the ski area Mountain Creek. The rental agreement included a release and an indemnification clause. Like 99% of the indemnification clauses in releases it was written badly, but Mountain Creek tried to sue Lavin for their costs in defending the lawsuit by the original plaintiff and lost!
Analysis: making sense of the law based on these facts.
Indemnification agreements are not understood by 95% of the outdoor industry. 99% of them when attempted to be used by the courts have been thrown out, but you still find the language in releases.
Get rid of that language, it does not work and only makes judges mad!
In this case, the indemnification language was in the rental agreement signed by the co-defendant when he rented skis. The language was the general “I don’t know what this means, but I’ll stick it in a release” language.
After the ski area had won its lawsuit, and the co-defendant had settled with the plaintiff, the ski area sued the co-defendant to recover their attorney fees and costs they spent in defending the lawsuit.
The court, in this case, started by looking at New Jersey state law covering indemnification agreements. Because they are such of a particular type of contracts, each state has evolved its own set of laws on how an indemnification agreement is going to be interpreted. New Jersey:
… indemnity provisions differ from provisions in a typical contract in one important aspect. If the meaning of an indemnity provision is ambiguous, the provision is ‘strictly construed against the indemnitee.
Meaning the courts interpreted the agreement strictly. “We have characterized this approach as a “bright line” rule requiring “explicit language” when “indemnification includes the negligence of the indemnitee.”
The court then looked at the indemnification language in the ski equipment rental agreement and said the language fails.
We agree with the motion judge that the indemnity provisions in the agreements are ambiguous as to claims of Mountain Creek’s independent negligence. Although the provisions reference Mountain Creek’s negligence in bold and capitalized letters, the language “arising out of or resulting from my conduct . . . whether or not MOUNTAIN CREEK’S NEGLIGENCE contributed thereto in whole or in part” is insufficient to meet the Azurak standard. One could reasonably interpret the provisions to require indemnification and defense of Mountain Creek for any claims of negligence against it caused by Lavin’s conduct even when Mountain Creek is partially at fault or to require Lavin to indemnify and defend Mountain Creek for separate claims of its own negligence.
The court then proceeded to destroy the entire idea that an indemnity agreement in this case would ever work.
An indemnitor may expect to indemnify and defend an indemnitee for claims caused by its negligent conduct when the indemnitee may also be at fault but may not expect to be solely responsible to indemnify and defend the indemnitee when the indemnitee has committed separate acts of negligence.
Simply stated the court found “The provisions at issue do not meet the bright line rule requiring “unequivocal terms” that the duty to indemnify extends to the indemnitee’s own negligence.”
The ski area then argued the New Jersey Skier Safety Act supported the indemnification. The court struck this down with one sentence.
This indemnification scheme is consistent with the Ski Act’s purpose to promote “the allocation of the risks and costs of skiing” as “an important matter of public policy.” N.J.S.A. 5:13-1(a). Moreover, in Stelluti, the Court considered that “some activities involve a risk of injury and thus require risk sharing between the participants and operators”
The court went into the entire issue of the release that contained the indemnification provision and found the release was a contract of adhesion.
As a threshold issue, we determine that the Release and Rental Agreements were contracts of adhesion. If a contract is characterized as a contract of adhesion, “nonenforcement of its terms may be justified on other than such traditional grounds as fraud, duress, mistake, or illegality.” An adhesion contract is one that “is presented on a take-it-or-leave-it basis, commonly in a standardized printed form, without opportunity for the ‘adhering’ party to negotiate except perhaps on a few particulars.” “Although a contract of adhesion is not per se unenforceable, a [judge] may decline to enforce it if it is found to be unconscionable.”
The court reviewed under New Jersey law what a contract of adhesion was and how it was determined to be one.
When determining whether an adhesion contract is unconscionable, we evaluate four factors that “focus on procedural and substantive aspects of the contract to determine whether the contract is so oppressive, or inconsistent with the vindication of public policy, that it would be unconscionable to permit its enforcement.” Id. at 247 (internal quotation marks omitted) Those factors include “the subject matter of the contract, the parties’ relative bargaining positions, the degree of economic compulsion motivating the ‘adhering’ party, and the public interests affected by the contract.” The first three factors speak to procedural unconscionability, and the last factor speaks to substantive unconscionability. We consider these factors using a “sliding scale analysis.”
The court then applied the test for an adhesion contract to the rental agreement.
applying the four-factor test, the Release and Rental Agreements are not procedurally unconscionable. At the time of the incident, Lavin was twenty years old and a layperson without specialized knowledge of the law. He maintains he did not read the agreements before signing them despite having the opportunity to do so. Lavin also stated that he did not have the opportunity to negotiate the terms of the agreement. However, Lavin was engaging in a recreational activity like the adhering party in Stelluti, and he was under no economic duress or obligation to consent to the agreements. Lavin could have chosen to take his business to another ski resort, rented skis from a different facility, or could have simply read the agreements or contemplated them before signing.
The court found the rental agreement was a contract of adhesion. However, in this situation it was not void on its face.
However, that creates a ruling that all other courts in New Jersey must rely upon in reviewing the rental agreement of Mountain Creek Ski Resort. By pushing the issue, they created a lower step for the plaintiff’s bar to overcome in the future.
So Now What?
If you have indemnification language in your release, and it was not written by me, have an attorney remove it. It is a waste of space on the paper and only can be used to make judges mad.
Indemnification agreements must be written in a special way to cover very specific circumstances that must be outlined in the agreement.
If you want to understand an indemnification agreement, read your automobile insurance policy. (Think about shrinking that to fit into your release…..)
That does not mean indemnification agreements in releases are all bad. They can be used, IF WRITTEN PROPERLY, to indemnify the outfitter for their actions if backed up by other documents or contracts. Meaning if you live in a state that charges for rescue, you can require your guests to indemnify you for any rescue costs you may incur on their behalf.
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