Liability Waivers Explained
Liability waivers for contractors can be a vital part of your risk management process.
What is a liability waiver?
A liability waiver is a contract between a contractor and a homeowner. Essentially, it’s a promise that the homeowner won’t blame you or take legal action against you if something bad happens while you’re working on the job. But it also helps you from being sued for work you didn’t even do. A liability waiver doesn’t necessarily release you from responsibility for all parts of a contracting job. It won’t get you out of a legitimate legal battle if you failed to do the job you agreed to do. But it can protect you from liability when things go wrong. If you’re a contractor, you have to think about things like weather damage, theft, extra labor costs, and injuries. A quality liability waiver can help protect you from all of these could happen during a job:
- Your employee injures someone
- You miss your deadline
- Someone gets hurt on your job site
- Someone’s property gets damaged
- Your equipment gets damaged or stolen
- An employee breaks something at the job site
- Your subcontractor is late or unfinished
Even if you’ve been to the job site a million times, there’s always a chance that something could happen. How do you know that you and your employees will do everything correctly? And how do you know that some damage to someone else’s property that happens on your job site didn’t occur as a result of someone else’s negligence? You don’t . But if you can get a client to sign a liability waiver, you can at least limit the extent of your legal issues. For a homeowner, signing a liability waiver can bring about peace of mind. They can avoid worrying about injury or damage. If they know that they are protected, then they can just enjoy the process of their remodeling project. Liability waivers can vary in how they are applied. Some are simply written to protect well-defined risks, while others are broader and cover "any and all" possible future risks. In other words, a broader waiver covers more risky situations than a narrowly defined one. The breadth of the waiver can affect whether the courts will enforce it. Some courts may not enforce a liability waiver unless the waiver is specific about what exactly is not covered. On the other hand, other courts may not hold enforceable a liability waiver that is too broad and general. It’s a case-by-case thing, and if you have a bad liability waiver, that can actually put more of your business assets at risk. Also take note that if a homeowner doesn’t completely understand what they’re waiving, a court may not enforce that waiver either. It’s your job to ensure that your clients know the risks they are agreeing to assume, so they need to read the entire document you present to them. And unfortunately, a poorly worded liability waiver may expose other types of risks.
The Crucial Ingredients of a Contractor Liability Waiver
The essential component of any liability waiver form is that it contains language that explicitly releases a contractor from liability for damages caused during the course of normal business dealings with a client. However, a liability waiver form should contain several other pieces of information as well.
First, a simple statement that the person signing the document is waiving all liability he/she may have against the contractor is critical. Many contractors include a statement like the following:
"It is hereby acknowledged and agreed between [CONTRACTOR] and [CLIENT] that [CLIENT] shall indemnify, hold harmless, and release [CONTRACTOR], their agents and employees from all actions, claims, debts, liabilities, judgments, damages, cost, losses and expenses (including attorney’s fees), which may be incurred or result to [CLIENT] or to any third party in any way, caused by, or in any manner arising out of, or at all connected with the services performed pursuant to this Agreement."
In addition, some contractors choose to specifically note that the limit of liability for their organization is the cost of any contracted services. This is normally expressed as follows: "The limit of liability of [CONTRACTOR] shall be the costs of services contracted for, and shall not in any way extend to loss of personal items, lost wages, or any other costs of whatever nature."
Some languages focuses on the fact that the liability waiver form is completely voluntary. This is often expressed in the following manner:
"It is further understood and agreed that [CLIENT] has willingly entered into this waiver and release of liability and has been encouraged to seek legal counsel of their own choosing. [CLIENT] acknowledges that they have carefully read the terms of this waiver and release and fully understand the same. This Complex Waiver of Liability and Release may not be modified or changed. Should one or more of the provisions of this Agreement be declared invalid or unenforceable for any reason, the remainder of the Agreement shall remain in full force and effect. This Agreement constitutes the entire agreement between the parties and no modification or waiver of any provision of the Agreement shall be effective unless in writing signed by [CLIENT] and [CONTRACTOR]."
Finally, many liability waiver forms contain a statement to the effect that the client is releasing the contractor from liability for work performed by subcontractors.
Contractor Liability Waivers – The Upsides
For both contractors and their clients, liability waiver forms offer valuable benefits. For the contractor, they provide protection from liability following injuries, accidents, property damage, and a host of other risks of their profession. In fact, many contractors can’t find work without one. For instance, surety bonding agencies will not issue performance or maintenance bonds to contractors who don’t have liability insurance or a waiver form with proper language to protect them from liability.
For the client, liability waivers are an opportunity to protect their financial interests as well. Clients of contractors benefit from the waiver in a few ways: The client is less likely to be held financially responsible for damages or injuries subsequent to contractor actions. The contractor will be more likely to screen his sub-contractors or hire quality sub-contractors who are sufficiently bonded and insured. Waiver contracts prevent disputes from arising over who bears responsibility for damages, so the business relationship remains intact. Waiver contracts give clear terms for the settlement of disputes, which helps to prevent unduly long and costly litigation over liability claims. By keeping contractors safe from the legal and financial consequences of client negligence, clients are also saving themselves money and delays, so they too see the improvement in performance and timely completion of projects.
For the parties involved, a waiver of liability contract protects all with something to lose. In any civil business arrangement where a financial transaction is involved, there is potential for property damage. When that property is damaged, someone must be held accountable. When that someone is awarded damages in a civil suit, that loss must be paid for by someone else. This cycle of liability leads right back to the claimant and renews a vicious cycle of retribution that offers no real solution and only temporary relief from unwanted liability.
Waiver of liability contracts, or liability waiver agreements, as they are also called, offer the only way to definitively settle any disputes arising from a liability claim. Waiver contracts release the client from liability as well as the ability to file any such liability claims. Waiver contracts therefore not only nullify both the contractor’s and the client’s liability claims against one another, they also prevent a host of financial liability claims further down the line. In the best case, they help the contractor and the client to save money. At the very least, they prevent individual contractors and clients from becoming embroiled in a destructive series of liability claims and countersuits.
Legal Nuts and Bolts and Pitfalls
Liability waivers for contractors can be an important aspect of any job, whether it’s a new build or a renovation. But legal considerations and potential limitations in setting up waivers can bring headaches to contractors and lead to lawsuits.
Judges at both state and federal levels have found liability waivers to be unenforceable (and thus, void) for a number of reasons. For example, if such a waiver is found to be unconscionable, this can make it unenforceable, even if the provision is perfectly legal on its face. Courts have stated that if an agreement is determined to be unconscionable, courts will refuse to enforce it as they will see it as being "clearly unfair, and unreasonable" to one of the parties.
Most often, this sort of thing refers to such situations as clerical errors (an obvious typo in the fine print, for example). However, as indicated above, more recent studies at the state and federal level have shown that judges are refusing to enforce waivers for a number of reasons. An agreement could be found to be unconscionable if the contractor’s business interests override the other party’s right to be compensated for negligence . Many jurisdictions will refuse to enforce waivers if the waiver goes beyond simple compensatory damages to cover actual losses.
The same applies for waivers that require one party to waive the right to rely on codes, professional standards or other statutory or regulatory negligence requirements. Particularly in the case of joint contracting whereby properties of two parties are mixed together into a single bonding agreement, some courts have found that liability waivers are void. In these cases, the courts have ruled that a clause does indeed appear to be purely for the protection of the contractor, rather than for a mutual benefit. Therefore, the court will find that such a statement potentially leads to unfair risk as the contractor cannot absolve itself of liability by simple reference to a contract.
Keep in mind that court rulings regarding the enforceability of waivers are always based on the situation around each contract. A court will closely examine the contract’s terms, language and how it was presented, and in order to get a good idea of how your individual case may be impacted by this, you should get help through our contract review service.
Drafting a Water-tight Liability Waiver
The best possibility of having a comprehensive liability waiver that protects the contractor and its employees from liability and lawsuits is to have an attorney draft it to ensure that it is following current legal standards. An attorney can make sure that the language of the liability waiver form is clear and understandable, without any potential for misinterpretation or misunderstanding. Some liability waivers contain career specific terminology that may seem strange or alien to someone outside the field. The more clear and concise the language, the better the chances that the waiver will be enforced and stand up in court. An attorney may also be able to provide information about any local labor laws that need to be adhered to, including how long these waivers are valid for in that particular location. Avoid contract pitfalls by making sure your waiver doesn’t contain vague language, which can get it thrown out in court. Be as specific as possible about what type of physical exertion a worker will be involved with, what types of chemicals or exposures they will come in contact with, and what the specific risks are in their job. Being overbroad in the language of the waiver may lead a jury to sympathize with the injured worker, who may not have been meaningfully aware of the risks involved in a task or what types of injury might occur.
Contractor Waivers: Commonly Asked Questions
If you’ve worked as a contractor for any length of time, you’ve probably signed a liability waiver at some point. Generally speaking, these release forms state that you assume responsibility for some particular service. However, this document can be quite important to your overall case. Here are a few of the most popular questions about contractor waivers:
Q: Does A Liability Waiver Relieve A Storm Damage Contractor Of Liability?
A: There is no such thing as a "fault-free" liability waiver. A liability waiver has no effect unless it is made known to the other party before the fact. In other words, the terms must be explained verbally or in writing. This means that a storm damage contractor who makes you sign a liability waiver is collecting on a debt before it’s due.
Q: What Happens If A Damage Waiver Was Not Signed?
A: If you or anyone proffering work fail to sign a damage waiver acknowledgement form, you may be able to recover damages if someone is subsequently harmed because of that failure to warn .
Q: Can A Damaged Worker File A Lawsuit If A Liability Waiver No Longer Applies?
A: If you were injured on the job and did not sign a release form, you may have a lot of wiggle room when it comes to filing a lawsuit against a storm damage contractor. If the waiver is inapplicable or void, you will be able to file suit without any interference from the other party claiming you had a duty to warn. Instead, the case will focus on fault and negligence issues.
Q: How Are Liability Waivers Enforced After A Lawsuit Is Filed?
A: A release form is a contract. Like any contract, a liability waiver is enforceable in a court of law to the same extent as any other legal instrument. A judge may consider a release form binding unless:
The party alleged to be harmed was unaware of the existence of the injury;
The release form was obtained under duress;
A material defect in the waiver form itself presented an issue of fact; or
The physical or monetary settlement is unconscionable.