ContractsProf Blog

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Valparaiso University Law School

Monday, September 7, 2020

Virtual Symposium I: Jeff Sovern on Liability Waivers

Congress Should Outlaw Contract Clauses Waiving Liability for Negligently Exposing People to COVID
Jeff Sovern

SovernEvery 1L learns the tort of negligence. But sometimes businesses use contract law to push tort law aside by getting customers to sign contracts waiving liability. Many reasons exist for why states should limit liability waivers and I will mention some below. But there is a special reason for making waivers of liability ineffective when it comes to COVID. Whatever merit there is in enforcing liability waivers in ordinary circumstances simply disappears during a pandemic.

The argument behind liability waivers as to normal risks is that people should be able to arrange their private affairs as they wish, but COVID liability waivers are not purely private.  Virus liability waivers are very different from, say, a ski resort’s form disclaiming liability for negligently causing a skier a broken leg. A skier on crutches will not cause others to break their bones. When a business fails to take adequate precautions against infecting its customers with COVID, it increases the likelihood that not only the consumer but also others with whom the consumer comes into contact will be afflicted by the virus. Even if the consumer knowingly signed a waiver form—a dubious proposition that I discuss below--those others did not. Liability disclaimers that protect people in private contractual relationships in which others do not have an interest are a far cry from COVID liability waivers.

Waivers of liability may harm public health during the greatest public health emergency this country has faced in living memory. As David Vladeck has pointed out, liability waivers reduce the incentive to take reasonable efforts to prevent the spread of the virus at precisely the time when we most want people to maximize the precautions they take against spreading the virus. Society has a strong interest in making waivers unenforceable to preserve that incentive to be careful, just as it has an incentive to force people to wear masks, socially distance, and so on.

COVIDThe cost of the virus has been devastating. More than 180,00 people dead and millions more who have suffered. Millions of lost jobs. Trillions of dollars in government spending. Staggering changes in the way we live. Discouraging private actors from maximizing their efforts to prevent COVID infections increases the likelihood that those numbers will grow. Those numbers simply overwhelm the argument that people should be able to disclaim liability for their own carelessness.

On top of that are the usual arguments for arguing against the enforceability of waivers. In More Than You Wanted to Know: The Failure of Mandated Disclosure (2014), Omri Ben-Shahar and Carl B. Schneider present considerable evidence suggesting that consumers ignore the language of contracts before signing them.*  As my co-authors and I have argued in Whimsy Little Contracts, even if consumers read the waivers, it is not at all clear that they will be able to understand them. We found that only 14% of survey respondents understood that a contract clause took away their right to sue in court).  Moreover, as Uri Benoliel and Shmuel I Becher have shown, businesses often write forms in such a way as to make them incomprehensible.  Apply the reasoning from something I wrote pre-pandemic, we can predict that, when it comes to COVID, businesses might actually find it in their interests to make these forms more difficult for consumers to grasp, in case consumers who understand them decline to sign them or realize the business might carelessly infect them and then walk away.  Before society permits businesses to take away consumer legal rights, shouldn’t there be some evidence that consumers actually understand the consequences of the clauses that they are being asked to sign? Even if adults understand those clauses—and they don’t--do we really expect, say, seventeen-year old college students to take the time to read and understand liability waivers as they move into their dorms?

The easiest way to outlaw COVID waivers is for Congress to enact such a provision, probably based on its commerce clause power. That doesn’t seem to be in the cards at the moment: indeed, Senate Majority Leader Mitch McConnell desperately wants to go in the other direction; the Senate Republican bill would shield businesses from liability even for their own negligence and strew roadblocks in the way of consumers who want to sue the companies which recklessly injured them. The argument for barring liability rests largely on the claim that businesses will be overwhelmed with frivolous cases from consumers and employees who have been sickened by the virus. Never mind that thus far, consumers have brought few cases against businesses arising out of the virus. But the irony is that in fact, state courts are overwhelmed not with cases brought by consumers against businesses but with cases businesses have brought against consumers. Indeed, a recent Pew study found that one-quarter of the cases filed in state courts are debt cases asserted by businesses against consumers. Rather than focusing on preventing the filing of non-existent cases, legislators would do better to address the flood of cases that actually exists, in a system that the Federal Trade Commission has called broken.

It isn’t enough simply to make the waivers unenforceable because even unenforceable contract clauses sometimes benefit misbehaving businesses. Studies by Tess Wilkinson Ryan and Meirav Furth-Matzkin & Roseanna Sommers show that consumers are often tricked into thinking they are bound by unenforceable terms.. A consumer who thinks a waiver binding will probably drop the matter. Businesses that know that they can deceive consumers in such a way have an incentive to use the invalid clauses and then underinvest in precautions against the spread of the virus. For that reason, any legislation should also provide that using such clauses is an unfair and deceptive practice and thus in violation of the Federal Trade Commission Act and state UDAP statutes.

Congress has a choice: it can preserve the illusion that consumers and businesses are engaging in the private ordering of their affairs, even though consumers may have no idea what they are agreeing to. Or it can save lives by increasing the incentive of businesses to take adequate precautions against the spread of the virus by prohibiting the use of COVID liability waivers.

*This book was the subject of a previous virtual symposium on this blog!

https://lawprofessors.typepad.com/contractsprof_blog/2020/09/virtual-symposium-jeff-sovern-on-liability-waivers.html

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Comments

Interesting post. Has any business ever been held liable for the fact that an individual contracted a global pandemic while on the business’s premises? Is there some established right to be protected by a business against communicable diseases in general? If not, the liability waiver is just discouraging the filing of nuisance suits.

Posted by: Frank Snyder | Sep 8, 2020 1:10:49 PM

And an interesting comment in turn. I haven’t looked for cases arising out of global pandemics because such pandemics are (fortunately) rare. But as a general matter, businesses that negligently injure patrons are liable. I don’t have time at present to look for cases involving communicable diseases, but I recall a case in which a restaurant was held liable for negligently infecting a customer with hepatitis. But if there were no precedents, why would you assume that the suits are nuisance suits? Why not assume that the plaintiffs are attempting to establish new law? And new law that might have the salubrious effect of making businesses more careful about spreading a deadly disease at that. Would you rather, for example, dine at a restaurant that says if we negligently sicken you, you are on your own, or at a restaurant that says we will take reasonable precautions to protect your health because if we don’t, we are accountable?

Posted by: Jeff Sovern | Sep 8, 2020 4:28:11 PM

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