This article is part of a larger series on General Liability Insurance.
When used in the right manner, liability waivers can help protect your business from lawsuits. Of course, you can still be sued, but the liability waiver serves as part of your defense that the plaintiff waived their rights to a claim. However, there are cases where the liability waiver is unenforceable.
What Is a Business Liability Waiver?
A liability waiver, sometimes called a release of liability form or general waiver, is a document that a business has patrons sign to acknowledge risks and release the business from claims arising from injury. You see these types of waivers frequently with recreational or fitness businesses.
For example, you might have to sign a liability waiver when you join a gym or go on a paid horseback-riding tour. The waiver means that you realize there are risks to the activity you will be doing, and you accept responsibility for those risks.
A release is different from a waiver in that it relieves a party from any responsibility, but this usually applies to an already-existing relationship. For example, you may have someone sign a release of debt to relieve the debtor of the responsibilities of the original agreement.
How Does a Business Liability Waiver Work?
A business liability waiver is signed at the onset of a new relationship with a customer. Insurance companies may require certain types of businesses to obtain a liability waiver to reduce the number of claims made with a high-risk business.
When the customer signs up to do a particular activity or service, they sign the waiver. In the waiver is language stating that the consumer acknowledges the potential risks involved in performing the activity.
Because people aren’t having an attorney review the document, the language used in a liability waiver must be easily understandable. The intent of the form must be clear, as those signing it will have fewer rights if a claim arises. The liability waiver should state specifically what the risks are and must require the signature of the consumer. For legal purposes, underage participants must have a parent or guardian sign on their behalf. In addition, liability waivers cannot violate state law.
The waiver protects the business from ordinary negligence. However, the waiver is not relevant when gross negligence is found. Ordinary negligence is an act or omission that another reasonable person would not have committed. Gross negligence is an act that consciously disregards what is considered reasonable care for another.
What a Business Liability Waiver Should Include
To be valid, a liability waiver must have key components included in its language and structure.
The key components of a liability waiver include:
- Inherent risks: The waiver must declare that activities have risks involved and should include a comprehensive list of those risks.
- Assumption of risk: The waiver must include a statement to the effect that the consumer acknowledges the risk and voluntarily assumes the risk as their own.
- Release clause: This statement directly talks about how the business assumes no risk, and the consumer will not hold the business liable in the event of injury.
- Indemnification clause: This is a statement saying that the consumer is responsible for the business’ legal costs if they are sued.
- Venue clause: The venue clause states what legal jurisdiction the waiver falls under. This is often the city or state in which the business is located.
- Successors and assigns: This protects anyone who might take over the company at a later date, ensuring that they are not subject to a lawsuit for the same liabilities.
- Signatures: The consumer must sign the waiver or have a parent or legal guardian sign for them.
Failure to include all components of the liability waiver could result in an unenforceable waiver if you are taken to court or if an insurance claim is filed.
When Does a Business Need a Liability Waiver?
A business needs a liability waiver when they have inherent risks associated with their services. Common examples of businesses needing liability waivers include:
- Personal trainers and gyms
- Event venues
- Conference organizers
- Theme parks
- Businesses offering high-risk activities like sky diving, scuba diving, trampoline houses, and rock climbing
If your industry has insurance claim statistics with high loss rates for certain types of injuries, this is a key indicator that you might need a liability waiver program. If you are unsure whether you need a liability waiver, talk to your insurance agent. They can best advise you on the risks your business has and whether a liability waiver can help.
Can a Business Liability Waiver Replace General Liability Insurance?
While a liability waiver can reduce the chance of lawsuits and liability claims, it does not replace a general liability insurance policy and, in many cases, a general liability policy is required. Even with the waiver, you can still be the subject of a claim or a lawsuit. Remember that the waiver becomes part of your defense but is no guarantee that a payout won’t happen. Insurance protects you in that case, so it’s important that you maintain adequate general liability coverage.
Plus, there are other types of claims that the general liability policy protects you from. Imagine that you have a liability waiver signed for a specific activity, such as personal training, but your customer slips and falls in the bathroom. The claim resulting from this incident would be covered by general liability insurance.
If you have a business where consumers are participating in risky activities, you’ll want to implement a liability waiver program. This will reduce the chances of an insurance claim or lawsuit. Make sure that liability waivers have all the required components to be legally enforceable. With any high-risk business, implement safety programs to reduce the number of injuries and liabilities as a whole.