How to Reduce Financial Risk for Sports-Related Businesses

By utilizing this checklist for evaluating and using waivers, sports and recreation administrators can effectively reduce the exposure of their business and employees to financial risk.


Operators of sports-related businesses often use waivers to protect themselves against financial liability resulting from negligence. This is so in spite of the widespread belief that waivers are worthless or will not stand up in court. The fact is, however, that in at least 45 states, a well-written waiver, signed voluntarily by an adult, can serve as a complete bar to liability for injuries caused by the negligence of the business or its employees. Nevertheless, these agreements are often challenged in court and rendered ineffective, either because of deficiencies in the agreement or the circumstances under which the agreement was signed.

Waiver law is by no means the same in each state. Some states seem to lean toward tort-law theory, which stresses compensation for injuries sustained as a result of the unreasonable or negligent conduct of another. In those states, the standards required for an enforceable waiver are very demanding. Other states lean more toward contract law, which stresses the premise that individuals should be able to govern their own affairs and make contracts - even bad contracts - without governmental interference. These states generally require a much less demanding standard for waiver validity. In Figure 1, (previous page) each state has been placed into one of four categories based upon the rigor required for a waiver to be enforceable. The categories and the number of states falling into each category are: Lenient (7), Moderate (20), Rigorous (18), and Not Enforced (3). No sport-related waiver cases have been found in two states - New Mexico and Rhode Island.

The difference in the rigor required can best be illustrated by looking at some of the waivers used in states falling into each category:

Figure 2 illustrates several waivers from the lenient category that have been upheld in court. While it is always safer to use a well-written waiver, one can see that courts in these states sometimes have few requirements for a waiver to be enforceable.

Figure 3 illustrates several waivers that have been upheld in court in states with moderate requirements. It is apparent that while these appear more comprehensive than those in Figure 2, they still fall far short of the standard suggested in the checklist that follows.

Figure 4 includes two waivers which, while seemingly well-written, failed when subjected to the scrutiny of courts in two states classified as rigorous. The Florida waiver failed because the waiver did not include the word "negligence," a requirement in Florida and in several of the states categorized as rigorous. The other failed because the court concluded that the contract structure and organization obscured the exculpatory clauses. The court felt the signer was not put on clear notice of the intent to release the defendant from liability for its own negligence. Each of these would probably be upheld in a state in the lenient or moderate categories.

Management can effectively reduce the exposure of a sport-related business and its employees to financial risk by carefully examining the waiver it requires and by considering how the waiver is being used.

The following checklist, which includes things to look for in a waiver agreement and some suggestions regarding waiver use, is divided into three sections. The first section refers to the requirements of a legal contract. Those requirements must be met in order for the waiver to be valid. The second section involves the format and exculpatory language of the waiver. Courts have indicated that the effectiveness of a waiver can be affected by the format of the agreement. The final section includes items that are sometimes included, but are not always required for an effective waiver. The last four items help to establish the assumption-of-risk defense, used when the injury is not the result of negligence. The failure to warn of the risks involved in the activity appears to be an increasingly common reason for the failure of waivers. (See Coughlin v. T.M.H. International Attractions, Inc. [1995 U.S. Dist. LEXIS 12499 (Ky.)] and Maurer v. CerkvenikAnderson Travel, Inc. [165 Ariz. Adv. Rep.51 (1994)].)

Sport managers should examine the waiver used by their business and complete the following checklist:

Waiver Evaluation Checklist

Requirements for a Legal Contract:

1. Is the wording of the waiver such that it is clear and easily understandable by the patrons signing it? It is important that the waiver clearly state that the signer is releasing the business from responsibility for injury to the signer caused by ordinary negligence on the part of the business or any of its employees. The waiver should include a phrase such as, "I hereby release [business] from any and all present and future claims resulting from ordinary negligence on the part of [business]." The language must be simple, straightforward and unambiguous. The waiver should plainly convey its message and should not be full of legalese.

2. Is consideration denoted within the contract? To have a valid contract, there must be consideration - that is, something in exchange for something else. A phrase such as, "In consideration of my participation, I agree to..." indicates that the signer is receiving participation in exchange for relinquishing the right to file suit.

3. If the signer of the waiver is a minor, does the waiver include a space for a parent's signature? The general rule is that waivers are not effective when used with a minor because a minor may disaffirm a contract made by the minor or by a parent on the minor's behalf. While a few states support the use of waivers when signed by a parent, the use of an "Agreement to Participate" might offer more protection for the sport-related business. An "Agreement to Participate" describes the activity, the conditions for participation and an assertion that the minor wants to participate. This agreement lays a foundation for an assumption-of-risk defense, in which the participant has assumed the inherent risks of the activity, but not those risks resulting from the negligence of the business.

4. Does the waiver specify parties other than the signer who are relinquishing claims by virtue of the waiver? Additional protection may be gained by including a phrase in which the signer relinquishes, on behalf of self, spouse, heirs, estate and assigns, the right to recover for injury or death. Be aware, however, that state laws vary and that this phrase will not be effective in all states.

5. Is the waiver specific as to who is protected by the waiver? All classes of persons or entities that are to be protected should be listed in the agreement. The corporate entity, employees, volunteers, agents, sponsors or any others that you intend to protect should be listed. A general inclusiveness clause such as "...and all others who are involved" should conclude the listing.

6. Does the language broaden the interpretation of what was meant by the waiver? Examine the agreement for restrictive language and replace it with language that can be interpreted broadly when the court is determining what was meant to be included by the exculpatory agreement. Phrases that tend to broaden include: "in all phases of the activity," "while using the equipment," and "while on the premises." (Take care not to broaden the language too much, however. In light of a recent ruling in Farina v. Mt. Bachelor, Inc. [66 F.3d. 233 (Cal., 1995)], wording such as "…any and all claims arising out of..." might be interpreted to include gross negligence and should be avoided.) One example of effective wording used in a recently upheld waiver [Marshall v. Blue Springs Corp., 641 N.E.2d 92 (Ind., 1994)] is " a result of engaging in or receiving instruction in [scuba diving activities] or any activities incidental thereto wherever or however the same may occur."

7. Is the agreement free of any untrue or fraudulent statements? A fraudulent statement or misrepresentation within the waiver will invalidate it. In Merten v. Nathan [Wis., 321 N.W.2d 173 (1982)], the waiver falsely stated that the business carried no liability insurance. The court said that this constituted fraud and rendered the exculpatory agreement ineffective.

Format and Exculpatory Language:

8. Is the title of the waiver descriptive? It is important that terminology such as "Waiver," "Release of Liability" or "Indemnity Agreement" be used. Titles such as "Sign-up Sheet," "Roster," "Application for Membership," "Entry Blank," "Receipt" and "Sign-in Sheet" can be deceptive and can affect the validity of the waiver.

9. Is the print size large enough to be easily read? States do not usually specify a minimal size, but by using an 8- to 10point type size, the business can eliminate the issue if the agreement is challenged.

10. Is the exculpatory language conspicuous in the agreement? It is important that the exculpatory language - the specific statement that the participant will not hold the business liable for ordinary negligence - be featured in such a way as to bring attention to it. This may be done by: not burying it within the agreement; using bold lettering, underlining or all capital letters; and using notices such as "Caution: Read Before Signing" before the signature.

11. Is the signature near the exculpatory language? The exculpatory language of the agreement should be near the signature and certainly not on another page or on the back of the page.

12. Is there a statement by which the signer affirms having read the agreement? There should be, near the space for the signature, a statement such as "I have read and understand this waiver."

13. Does the agreement refer specifically to the ordinary "negligence" of the business or its employees? The use of the specific word "negligence" is required in a few states (including Florida, New Hampshire, New York and Texas), but it can be helpful to include the language in any state because it clarifies the intent of the agreement - and subsequently will significantly weaken a plaintiff's allegation of ambiguity. In light of at least one recent case, it would be safer to specify "ordinary negligence" in order to make it clear that protecting the sport-related business from liability for gross negligence is not the purpose of the document.

14. Does the agreement include specific mention of any risks that are unique to your business? For example, auto-racing waivers now include language that protects the business from liability for negligent rescue operations. In another example, a bar included a statement in the waiver asserting that the signer was not under the influence of alcohol before the patron was allowed to ride a mechanical bull. Some waivers used for scuba divers include mention in the waiver of the absence of a recompression chamber.

15. Does the agreement specify the duration of the waiver? Generally, such contracts continue until terminated by one of the parties, but it is safer to ensure the ongoing nature of the agreement with such language as "for injuries now or in the future," "which may hereinafter occur," "forever release and discharge" or "I forever release."

16. Does the agreement contain a severability clause? A severability clause is a statement within the document saying, in effect, that if any part of the document is held void, this will have no effect upon the validity of the remainder of the document. Language commonly used is illustrated by "The undersigned hereby expressly agrees that this release and waiver is intended to be as broad and inclusive as permitted by the laws of the State of Missouri and that if any portion hereof is held invalid, it is agreed that the balance shall, notwithstanding, continue in full legal force and effect." (See Vergano v. Facility Mgmt. of Missouri, 1995.)

Other Protective Language Within the Waiver:

17. Does the waiver include a statement of disclaimer by the business? In a disclaimer, the business asserts lack of responsibility or liability for injury resulting from the provision of the service.

18. Does the waiver include a "covenant not to sue"? A "covenant not-to-sue" is an agreement not to sue to enforce a right of action against the business.

19. Does the waiver include language by which the signer promises to indemnify or repay the business for financial loss caused by injury to the patron? An indemnification clause is indicated by such language as, "agrees to indemnify," "…reimburse," "…hold harmless" or "…save harmless." One who agrees to indemnify a business assents to reimburse the business for loss due to the lawsuit.

20. Does the waiver include a selection of venue? Venue selection merely specifies in which state and county any legal proceedings will take place.

21. Does the waiver clearly describe the nature of the activity? The waiver should describe the activity, including such aspects as how vigorous the activity is, the fitness level required and anything unpleasant about the activity. In general, the more familiar the participant is with the activity, the less detail required.

22. Does the waiver clearly warn of the risks involved in the activity? The waiver should include a representative list of risks associated with the activity. The list should not be comprehensive, but rather one that represents the broad scope of possible injuries. Phrases such as, "…including, but not limited to..." and a list of a few minor, common injuries as well as a few more serious ones, including death, should be included. The trend in some states seems to be to require that those signing waivers be warned of the risks involved in the activity. (The failure to warn of the risks involved was the reason for the ineffectiveness of the waiver in Maurer.) This section is also important in establishing the assumption-of-risk defense because one may assume only those risks of which one is aware.

23. Does the waiver include an affirmation of voluntary participation? The waiver should include a statement such as, "I understand the risks involved in this activity and am voluntarily participating in [activity]." This statement is important because the assumption-of-risk defense is effective only when participation is voluntary.

24. Does the waiver contain a statement by which the signer assumes the risk of the activity? This statement usually involves such language as "I recognize that whitewater rafting is a dangerous activity and I agree to accept any and all risks."

Since the requirements for a valid waiver vary from state to state, this checklist was constructed to conform with the laws in even the strictest states in which waivers are allowed.

Keep in mind that waivers are not valid in three states (Louisiana, Montana and Virginia), and that in New Mexico and Rhode Island, no sport-related waiver cases have been found. Both the map and this checklist should not be interpreted as a substitute for sound legal advice.

With the above in mind, however, if the waiver used by your sport-related business checks off on the above 24 items, the chances are that it is effectively written and offers solid protection against lawsuits alleging negligence by the business or its employees. If you said "No" to one or more of the items, you might want to consider modifying your current agreement or consulting an attorney to determine if you are protected adequately in your state.

Note that there is no scale - "22 or more" does not equal "Excellent." Such a rating would be deceptive to the user, since some items are more important than others. A single item that you checked "No" might be a key element for validity in your state, or it might be insignificant. The model waiver provided in Figure 5 (opposite) accounts for all 24 items in the checklist and can assist you in revising a waiver currently in use or in devising a new waiver.

While waivers are most often ruled invalid due to deficiencies in the format or language used in the agreement, occasionally courts refuse to uphold waivers because of the ways in which they are used or the circumstances surrounding their use. Examine the way your waiver is used, noting the following situations.

Challenges sometimes arise when the signer is not given an opportunity to read the agreement prior to signing. The validity of a waiver has been questioned when the signer was pressured to sign without reading in order to keep the line moving or when the light was so dim as to make the waiver unreadable.

A verbal explanation of the function of the waiver when it is distributed has been helpful in some cases. Simply announcing that this is a waiver by which the signers are relinquishing legal claims for injury might suffice as an explanation of the agreement. While courts generally hold signers responsible for what they sign, it would also be good policy to have someone read the agreement to signers who cannot read and, if possible, provide a translator for those who cannot read English.

Another precaution to take is to be certain the signer is not under the influence of alcohol (see checklist question #14 and Figure 3). Contracts signed while the patron is intoxicated are likely to be overturned when challenged in court.

Also, if the waiver is to serve as a defense in court, it is important that it be available. Management should establish an effective record-keeping system so the agreement can be accessed when needed. The statute of limitations varies from one to four years, depending upon the state. Waivers should be kept until that time has passed. With minors (see checklist question #3), the statute is usually one to four years after the minor has reached age 18.

Questions are often raised regarding the format of the waiver. Case law has clearly shown that waivers may appear in many forms. A common form is the standalone document as shown in Figure 5. Waivers may also be included as a part of membership forms, entry forms, team rosters and rental agreements. Those included as part of another document should be conspicuous and should give the signer clear notice that they are waiving liability of the business for its negligence. Waivers have been ruled invalid when the paper was folded or the exculpatory language was covered in some way so that the signer thought it was a sign-in sheet.

The preceding checklist can help managers evaluate the format and contents of any waivers used by their business. A well-written waiver, used properly, can help management control the exposure of the business to financial risk.

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