Legal Briefing: Exculpatory Clause Wording to Disclaim Tort Liability in Oregon

Courts will always look for ways to refuse to enforce a contract that seeks to disclaim liability for torts.

Legal Briefing: Exculpatory Clause Wording to Disclaim Tort Liability in Oregon

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Every properly worded alarm contract must contain provisions that disclaim liability for torts [negligence].

Having a paragraph heading isn’t enough. Courts will look for ways to refuse to enforce a contract that seeks to disclaim liability for negligence; simple as that. That can be in the alarm industry or other industries. Some industries cannot have such contractual disclaimers, but the alarm industry can, should and does.

But there are basically two ways to word these “contractual disclaimers for tort”:
*  the wrong way
*  the right way

The consequence of the wording?
*  wrong way won’t be enforced
*  right way should be enforced, and will be even if you have to appeal to a higher appellate court

K&K goes to great lengths to word these protective provisions correctly in the Kirschenbaum Contracts. In our Standard Form Agreements, we generally use universal wording that covers the bases in all jurisdictions.

In the Standard Form Agreements for nationwide use the nuances of states are covered when necessary.
There are generally two types of cases dealing with these disclaimer provisions. One is whether a disclaimer provision, no matter how it’s written, will be enforced, especially in the context of the specific lawsuit where a party seeks to enforce the contract.

The other is whether the actually wording of the contract meets the necessary minimum standards and criteria so that the provision will be enforced.

My position is that these protective provisions are vital in your contracts. Your central station agrees, your insurance company writing E&O coverage agrees and any potential buyer of your alarm accounts and contracts agrees. Exceptions are, well to be kind, just stupid.

Because it’s accepted in the alarm industry that the protective provisions are essential in the contract, it necessarily follows that contracts with the protective provisions will be more valuable, create more equity, command a greater multiple on the RMR when selling, than contracts without the provisions or contracts with poorly drafted provisions.

There are, again, two ways to find out if your contract has properly worded protective provisions. One, you can wait for a lawsuit and see if a judge enforces or tosses the provision, finding you free of liability or holding you to damage, which you may or may not be able to pay. Two, you can seek advice of counsel, an attorney who actually knows the alarm industry.

If you wonder or can’t figure out where you can find one, you’re hopeless, cross your fingers and best of luck. One thing is for sure: option two, seeking expert advice is a better option than waiting for the lawsuit.

If you don’t use or haven’t updated your contracts, then what exactly are you waiting for? Are you driving around holding your breath with tires about to blow because they have way too many miles on them? That can only kill you. Crappy contracts can end you up broke [rather than rich, which is what you should be from your alarm business].

The question that comes up regarding the protective provisions is whether the word “negligence” needs to be in the contract. In some states is may not be necessary; in others it may be necessary and in all states its better than not.

But Oregon apparently won’t require the magic word “negligence,” but to avoid that word [not sure why you’d want to], you do need to meet some high standards.  Excerpts from the following case discuss the issue.  It’s not from the alarm industry, but issues are the same.

Certain Underwriters v. TNA NA Mfg.

Supreme Court of Oregon
The issue in this case is the specificity of contract language required to disclaim tort liability under Oregon law. SunOpta, Inc. (SunOpta), purchased food processing equipment from Food Design, Inc. (FDI), for use in its sunflower seed production.

Following a listeria outbreak that resulted in a recall costing SunOpta’s insurer, Lloyd’s London (Lloyd’s), nearly 20 million dollars, Lloyd’s brought claims for negligence and product liability against FDI and TNA NA Manufacturing, Inc. (TNA), FDI’s successor in interest.

On summary judgment, the trial court held that SunOpta had waived any action in tort through its purchase contract with FDI, and specifically looked to four provisions of that contract-sections 5, 7, 11, and 12-reasoning that, when read together, those provisions reflected a waiver of tort liability.

The Court of Appeals affirmed the trial court, on narrower grounds, concluding that one provision, section 11, when viewed in the context of the contract as a whole, constituted a waiver of tort liability because the provision, “implicates liability beyond that arising under the contract.”

Certain Underwriters v. TNA NA Manufacturing, 323 Or.App. 447, 454, 523 P.3d 690 (2022). Lloyd’s petitioned for review, which we allowed. Throughout this opinion, we refer to the parties by name and use the term “defendants” to refer collectively to FDI and TNA.

We conclude that both the trial court and the Court of Appeals erred. Oregon law establishes that “a presumption will be indulged against an intention to contract for immunity from the consequence of one’s own negligence.” Waterway Terminals v. P.S. Lord, 242 Or. 1, 19, 406 P.2d 556 (1965).

In considering whether that presumption has been overcome, “a contract will not be construed to provide immunity from the consequences of a party’s own negligence unless that intention is clearly and unequivocally expressed.”

Estey v. MacKenzie Engineering Inc., 324 Or. 372, 376, 927 P.2d 86 (1996) (quoting Transamerica Ins. Co. v. U.S. Nat’l Bank, 276 Or. 945, 951, 558 P.2d 328 (1976)). As we will explain, to waive tort liability, contract language must be clear and explicit; waiver will not simply be deduced from inference or implication.

The text of the contract must show, clearly and   unambiguously, that the parties intended to disclaim actions outside of contract, i.e., actions in tort. Generic text that purports to waive all liability, or any loss, will typically be insufficiently specific to overcome the presumption against the waiver of tort liability.

Accordingly, the decision of the Court of Appeals is affirmed in part and reversed in part. The judgment of the circuit court is reversed, and the case is remanded to the circuit court for further proceedings.

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Security Sales & Integration’s “Legal Briefing” columnist Ken Kirschenbaum has been a recognized counsel to the alarm industry for 35 years and is principal of Kirschenbaum & Kirschenbaum, P.C. His team of attorneys, which includes daughter Jennifer, specialize in transactional, defense litigation, regulatory compliance and collection matters.

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