Waivers of Liability for "Gross Negligence":

The California Supreme Court issued an interesting decision this week on the enforceability of liability waivers in standard form contracts. At issue in City of Santa Barbara v. Superior Court, -- Cal.Rptr.3d -- (2007 WL 2027806), was a release from liability for "any negligent act" signed by a parent as part of an enrollment contract that allowed her daughter to participate in a camp for disabled children run by the city of Santa Barbara. The court ruled, 6-1, that the contract was enforceable as to allegations of ordinary negligence, but not gross negligence. This wasn't surprising; it is standard hornbook law that such waivers in the context of recreational activities are enforceable as to ordinary negligence but not as to gross negligence, although a few jurisdictions won't even enforce waivers for ordinary negligence. But it is interesting that, according to the court, it had never actually addressed this issue (although for decades Witkin on California Law has claimed that the majority rule applies in the Golden State).

One interesting issue is the logical coherence of the doctrine in this area. Why enforce liability releases even for ordinary negligence? It might make sense to enforce releases of narrow waivers of liability concerning specific conduct, on the ground that the consumer might be able to avoid some harms more cheaply than the seller can prevent it, and the parties should be able to contract for this efficient state of affairs: for example, a ski resort operator might state that it does not check the slopes daily for rocks, and the customer is precluded from suing if he crashes into one. But when the customer waives liability for all negligence, he usually will have no idea what precautions the seller otherwise would be taking but is declining to take as a result of the waiver. In almost every case, it will be cheaper for the seller to exercise ordinary care than for a consumer to compensate by taking extraordinary precaution if that consumer has no idea of what precaution to take.

One might argue for enforcing general releases on strict freedom-of-contract grounds: i.e., that the buyer and seller should be allowed to enter into any agreement that they find mutually agreeable. This seems problematic to me on the ground that bounded rationality limits the number of attributes buyers consider when they make purchasing decisions, and that the terms in the "fine print" will rarely be factored into the decision making process -- a topic I've written about extensively in law journal articles. Regardless, however, the freedom-of-contract argument doesn't provide a justification for enforcing releases from ordinary negligence but not from gross negligence.

One logical reason to distinguish between waivers of ordinary negligence and gross negligence liability is to counter the hindsight bias likely to affect juries. Perhaps we think that, after an accident occurs, juries will be likely to judge the seller's reasonable actions to have been unreasonable and, thus, negligent. Viewed this way, the doctrinal distinction between levels of negligence merely allows the seller with a good lawyer to ensure it will not be held liable for reasonable activity that led to an unfortunate outcome.

Whatever the justification, for the distinction between levels of negligence to have any practical value, it is important for there to be real difference in judicial treatment of complaints that allege ordinary negligence and complaints that allege gross negligence. Otherwise, an injured consumer who signed the waiver can get to a jury merely by using the term "gross negligence" in his complaint. It is true that defendants will get the "gross negligence" jury instruction rather than the "negligence" instruction, so the jury will be told to use a higher standard in judging liability, but this alone is cold comfort to a defendant if the hindsight-biased jury views the defendant as a wrongdoer and is free to award compensation to the injured plaintiff or his grieving family. For the distinction between ordinary and gross negligence to really have bite, courts must be willing to grant summary judgment when the facts fail to demonstrate "want of even scant care" or "an extreme departure from the ordinary standard of conduct" -- the definition of gross negligence according to the California courts. Here, the California courts really blew the decision. The facts indicated, at most, quite ordinary negligence, yet the Court of Appeal refused to grant summary judgment for the City, and the Supreme Court didn't review that part of the decision below, considering only the question of whether liability for gross negligence can be disclaimed.

Here are the pertinent facts: The plaintiff's 14 year-old daughter, Katie, suffered from seizures, yet the plaintiff affirmatively requested that Katie be allowed to swim in the camp's pool and dive off the diving board, and she declined an option to have Katie wear a flotation jacket while in the pool on the ground that she judged Katie to be a strong swimmer. Notwithstanding the parent's lack of concern, the City assigned a college-student employee who had served as a special-education aide and received special instruction on handling seizures to personally supervise Katie, and only Katie, in the pool. (In addition, the City had five lifeguards supervising all the children in the pool.) Katie suffered a mild seizure lasting only a few seconds one afternoon. The aide kept Katie out of the pool under observation for 45 minutes, and then determined that Katie was fine. She then allowed Katie to return the pool, but she required Katie to rest for several minutes after diving into the pool and swimming to side. The aide sat at the edge of the pool watching Katie at all times. On Katie's second trip into the pool, the aide briefly took her eye off of Katie. By the time she and the lifeguards could locate Katie, Katie had drowned.

By taking her eyes off of her charge for even a few seconds, the aide was arguably negligent, but if this constitutes "gross negligence" the distinction between the categories is meaningless. Nevertheless, the Court of Appeal held that the facts alleged were sufficient for a jury to find gross negligence, and thus it refused to grant summary judgment.