Maryland Court of Special Appeals Finds That Parents Can’t Sign Away a Child’s Right to Sue a Commercial Enterprise

Written by:  Andrew G. Scott, Esquire                                

The Court of Special Appeals recently issued an opinion in Rosen v. BJ’s Wholesale Club, Inc. on a matter of first impression:  namely, “whether a release of liability, presented by a ‘commercial enterprise,’ as previously defined [i.e., “a for-profit, commercial entity that principally serves private interests”], and executed by a parent, on behalf of a minor child and before the child has sustained any injury, is enforceable.”  The Court answered that question in the affirmative, and although it specifically stated that “[t]he question of whether a different rule should apply to government agencies . . . must await a case involving such an entity, or action by the General Assembly,” the reasoning of the Court is nevertheless instructive for the time being.

In Rosen, a parent signed a release on behalf of his 5-year old child, releasing BJ’S Wholesale Club (“BJ’s”) from all liability with regard to a playground located on its property.  The child subsequently fell head first from an elevated platform, suffering serious brain injuries.  The trial court held that the exculpatory and indemnification clauses contained in the release were valid and enforceable and therefore granted BJ’s Motion for Summary Judgment, but the Court of Appeals reversed, holding that neither clause was valid or enforceable.

The Court began its analysis by noting that, “although in the absence of legislation to the contrary, exculpatory clauses are generally valid, there are circumstances under which the public interest will not permit an exculpatory clause in a contract,” namely:  (1) “a party will not be permitted to excuse its liability for intentional harms or for the more extreme forms of negligence, i.e., reckless wanton, or gross”; (2) “the contract cannot be the product of grossly unequal bargaining power”; and (3) “public policy will not permit exculpatory agreements in transactions affecting the public interest.”  Noting that “[t]he ultimate determination of what constitutes the public interest must be made considering the totality of the circumstances of any given case against the backdrop of current societal expectations,” the Court concluded that the Maryland Code and Maryland common law “reflect a substantial public interest in protecting children and their rights to seek redress for negligence,” especially “where the tortfeasor is a ‘commercial enterprise.’”

On this point, the Court reasoned that, “because commercial enterprises derive economic benefit from the provision of their services, they are better able to bear the costs associated with injuries than the children or their families, as they can spread the costs of insurance among their customers.”  The Court further stated that “the State of Maryland has a parens patriae interest in caring for those, such as minors, who cannot care for themselves and the child’s welfare is a consideration that is of transcendent importance when the child might be in jeopardy”—an interest which the Court stated “tilts the scales in favor of invalidating a parent’s agreement to release his or her child’s future tort claims against a ‘commercial enterprise,’ even though such an agreement, if executed by the parent on his or her own behalf, may be enforceable.”  The Court held that the indemnification clause of the release was also invalid and unenforceable “for the same public policy reasons relied upon in holding the exculpatory clause unenforceable.”  In so holding, the Court emphasized that “indemnification clauses in contracts executed by parents on behalf of their minor children create an unacceptable conflict of interest between a parent and a child.”

Whether The Same Reasoning Would Apply to Public School Releases is Questionable

As noted, the Court specifically declined to extend its holding to government agencies, non-profit organizations, and their agents.  Moreover, the Court declined to provide any clear indication as to whether it would do so if or when given the opportunity. On one hand, the Court’s reasoning that the State’s parens patriae interest in caring for minors “is of transcendent importance,” and that that interest “tilt[ed] the scales in favor of invalidating a parent’s agreement to release his or her child’s future tort claims against a ‘commercial enterprise,’” suggests the Court might extend liability to school systems in that the same interest could be said to apply to children enrolled in public school systems. 

On the other hand, the main reasoning upon which the Court relied—i.e., that “commercial enterprises” are for-profit entities which are “better able to bear the costs associated with injuries” in that they can pass costs on to their customers—would seem to suggest that the Court would be hesitant to extend such liability to government agencies and non-profit organizations.  Moreover, the Court, citing several school law cases, specifically noted that of the “minority” jurisdictions that “have upheld the enforceability of [releases] executed by a parent on behalf of a minor child, . . . they have generally done so not where a ‘commercial enterprise’ was the subject of the release, but where the release was of a claim against either a government agency or non-profit organization, or its agents.”  Relatedly, although the Court cited Maryland law’s “substantial public interest in protecting children and their rights to seek redress for negligence,” it might well also conclude, as have courts in other states, that the benefits of student participation in extracurricular activities is a uniquely enriching aspect of one’s primary and secondary education which justifies the enforceability of releases.

 In sum, releases executed by parents on behalf of their children are still enforceable as against public school systems in Maryland, and although inconclusive, the Rosen Court’s holding does not suggest a change of course on this issue.